Our take on the latest Consumers price index (Mon 18 Jul 2022)
Inflation up to 7.3%pa
Non-tradable prices up 6.3%pa
Prices increased for 66% of items recorded
The key numbers...
- Inflation reached 7.3%pa in the June 2022 quarter, the highest level since June 1990 when prices rose 7.6%. Inflation of non-tradable (domestic-based) goods and services hit a record-high 6.3%pa, with tradable (overseas-influenced) inflation also hitting a record-high 8.7%pa. Both series began in June 2000.
- Prices increased for 66% of items recorded in the index, the largest proportion since at least 2018, indicating inflationary pressures are widespread.
- Rental price growth accelerated to 4.3%pa in June, the highest annual growth on record, with building costs continuing to grow at 18%pa.
- Prices for essential household items grew strongly over the year to June, with food prices up 6.5%pa, petrol prices up 32%, and household energy prices up 2.0% from this time last year.
- The widespread nature of inflationary pressure has led to price growth in unexpected sectors, with hospital services prices up 8.9%pa, telecommunications equipment prices up 17%pa, and major recreational and cultural equipment prices up 14%pa.
Inflation spreading, hits 32-year high
Annual % changes
...and our reaction
- Headline inflation was in line with our forecast for the June 2022 quarter, but was above the market pick, with the strength of non-tradable inflation indicating domestic demand and supply remained firmly unbalanced.
- Pressure continues to mount on households, with high increases in food and fuel prices no surprise in June, but strong growth in prices for other essential items, like rent and energy, will compound the constraints placed on household budgets.
- Inflation was spread across more areas of the New Zealand economy in June, with prices over the last year increasing across more items than ever before, and prices across all 11 groups increasing for the first time since March 2006.
- The June inflation result confirms that the Reserve Bank needs to continue acting to ease domestic activity. We firmly expect another 50-basis point increase in the OCR in August, with stronger interest rates needed to rein in inflation as domestic demand continues to outstrip available supply.
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