Our take on the latest Consumers price index (Wed 21 Apr 2021)
Inflation up to 1.5%pa
Transport prices up 3.9% from Dec 2020
Housing costs rising
The key numbers...
- Headline inflation edged up in the March quarter, growing 0.8% from the December quarter 2020 to sit 1.5% higher than a year ago.
- Transport prices have risen 3.9% from December 2020, driven by higher fuel price rises, and more expensive used cars.
- Rental prices are up 2.7%pa across New Zealand, and the cost of new building has risen 3.5% from a year ago.
- Food prices have risen at a slower pace, up 1.1%pa, although the components are quite mixed with fruit up 3.1%, vegetables up 4.7%, but meat and poultry are down 2.4% and seafood is down 1.8%.
- Inflation of tradable goods and services, although still well below non-tradables, has risen to 0.5%pa in March, up from a 0.3% decline in December.
CPI components
Annual % changes
...and our reaction
- Headline inflation is still below target levels, although the effect of price falls in the June quarter of 2020 is masking how much inflation has picked up since then.
- There are some signs of higher underlying inflation, but much of this trend seems to be driven by temporary factors.
- Supply chain issues have restricted the supply of many imported goods, which has kept pressure on prices of certain products. This pressure is apparent in how tradable inflation has picked up, and also evident in car prices and building materials.
- Supply chain issues can also disrupt our exports, which means that goods New Zealand produces for export may become cheaper if supply chain issues remain or trade issues keep products in New Zealand (like meats).
- The strength and resilience on New Zealand’s economy will also be adding some heat to prices, particularly related to housing, although we see inflation in the near-term driven mostly by temporary trends.
- Today’s result won’t change the Reserve Bank’s thinking around monetary policy settings.
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