New Zealand's annual inflation drops marginally to 7.2%

StatsNZ Tatauranga Aotearoa,  which is New Zealand's official data agency, recently revealed the country's inflation numbers and said that the Q3 consumer price index (CPI) touched 7.2%. According to StatsNZ, the rise in prices was becoming more broad-based. In the quarter, even though inflation numbers have fallen slightly from the second quarter figures, they are far below the expectations of economists and analysts.

Stats New Zealand said in a statement on Tuesday (18 October 2022) that on a quarter-on-quarter basis, the CPI rose 2.2%, following a 1.7% increase in the second quarter.

As per the survey,  the main reasons for the rise in annual inflation were construction costs, local government taxes, and rentals for housing, which made the construction cost escalate. Transport was also a major contributor to the annual increase, up 12%. In this category, the increase in petrol prices was the major contributor behind the jump.

As per the details given in the report, the increase in the cost of food contributed majorly, with food prices up 8.0%. The significant contributors to this were grocery items (up 8.0%) and fruit and vegetables (up 14%).

The cost of tradeable items was up 8.1% annually. 

StatsNZ added that annual non-tradable inflation rose 6.6%. This was the highest since June 2002, when StatsNZ began tracking data. 

Expectations

The rise in inflation in the third quarter beat all expectations. Economists had expected inflation to slow down in the quarter. The Reserve Bank of New Zealand’s (RBNZ) quarterly survey of expectations showed that inflation would average 4.86% over the coming year, from what it had expected in the previous quarter’s survey. As per the survey, inflation was expected to slow down in Q3.

NZ economists said that the central bank could raise the OCR by 75 bps in the November monetary policy announcement. Some even expect the same rate hike in the February announcement. This would take the interest rate to 5% compared to 4.75% previously announced.

On 5 October 2022, it raised its official cash rate by 50 basis points to 3.5%, the fifth such big move and the eighth hike in the last one year.