Annual inflation retreats further in latest figures

Rate cuts may come earlier - Kiwibank

Annual inflation retreats further in latest figures

The annual rate of inflation has dropped for a third consecutive quarter, latest Statistics New Zealand figures show.

Consumer Price Index (CPI) figures, released on Tuesday morning, show that inflation rose by 1.8% over the September quarter, higher than 1.1% recorded over the June quarter.

On an annual basis, inflation reached 5.6%, down from 6.7% over the March 2023 quarter, and lower than 7.2% over the September 2022 and December 2022 quarters.

Transport prices increased by 7.1% over the quarter, housing and household utilities increased by 1.7% and food prices increased by 0.9%.

Statistics New Zealand consumer prices senior manager Nicola Growden (pictured above left) said that the latest figures demonstrated that while prices were still rising, the rate of price growth continued to slow.

“Prices are still increasing but are increasing at rates lower than we have seen in the previous few quarters,” she said.

The biggest contributors to the rise in annual CPI were food prices, including bread and cereals (up 11.8%), milk, cheese and eggs (up 11.5%) and ready-to-eat foods (up 9.4%), StatsNZ said.

Housing and household utilities were the second-largest contributor to the annual increase, driven by construction prices (up 5%) and rents (up 4.4%).

Construction, rent price growth easing

While construction prices contributed to the annual CPI increase, StatsNZ figures showed that construction prices, up 5% over the 12 months to September, had decreased from 7.8% over the year to June, down from a peak of 18.3% in the first and second quarters of 2022.

Rent prices increased 4.4% over the year to September, down from an annual rate of 4.2% the previous quarter.

Petrol prices a key contributor to quarterly rise

Transport prices rose 4.6% over the year to September (up 7.1% in the September quarter).

StatsNZ said that the annual increase in transport was driven by rising prices for petrol and domestic air transport.

Over the September quarter, petrol (up 16.5%) and new motor vehicle purchases (up 4.6%) were the two largest contributors to transport prices, it said.

“Petrol prices increased 41 cents in the September 2023 quarter, partly due to the end of the 25 cents per litre tax relief,” Growden said.

Peak in official cash rate unchanged - Kiwibank

Commenting on the September figures, Kiwibank chief economist Jarrod Kerr (pictured above right) said that while over the quarter, the country was losing another battle with inflation, on an annual basis, it was “winning the war”.

Tuesdays figures “significantly” reduce the likelihood on any further rises in the official cash rate from the Reserve Bank, he said.  Leading into Tuesday’s report, the rates market had placed a 50% probability of an RBNZ rate hike in November, and the terminal rate implied in the wholesale market was 5.72%, he said.

Following the official CPI figures, Kerr expected a reduction in rate hike expectations.

“We continue to call the peak in the cash rate at the current 5.5%. And we go one step further in suggesting rate cuts may become likely by May next year,” he said.

The Consumer Price Index (CPI) survey measures how price changes affect the average consumer, recording the quarterly and annual price change.

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