Thursday 19th April 2012
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New Zealand consumer prices rose as expected in the first three months of the year, even as the tradable sector shrank on cheaper international holidays and discounted audio-visual equipment in the face of a strong kiwi dollar.
The consumer price index rose 0.5 percent in the three months ended March 31, according to Statistics New Zealand. That’s just short of the 0.6 percent forecast in a Reuters survey of economists and the 0.7 percent predicted by the Reserve Bank.
A 14 percent hike in tobacco excise was the biggest contributor to the series, and stripping out the impact of that tax hike, inflation was 0.2 percent.
The headline figure masked the 0.4 percent contraction in the tradable sector, which covers items that are open to foreign competition. That’s the second quarterly contraction in tradable inflation after it 0.9 percent drop in the last three months of 2011. Non-tradable inflation was 1.2 percent in the quarter.
“The tradable component was influenced by seasonally lower prices for international airfares and package holidays,” Statistics NZ said in its report. “Lower prices were also recorded for books and audio-visual equipment.”
International airfares fell 9.2 percent in the March quarter, and overseas holiday packages shrank 12 percent. Footwear prices shrank 1.6 percent in the period, audio-visual and computing equipment prices fell 3.9 percent, and newspapers, books and stationery declined 5.6 percent.
On an annual basis, AV equipment prices have dropped 14 percent, and telecommunications equipment prices have sunk almost 30 percent.
A strong kiwi dollar has underpinned cheaper prices for imports and international competition to local manufacturers, and Reserve Bank Governor Alan Bollard said the high currency may prompt him and his successor to keep the official cash rate, currently at 2.5 percent, lower for longer.
Traders have pared back their expectations for a rate hike, pricing in just 6 basis points of increases over the coming 12 months, according the Overnight Index Swap curve before the release.
Today’s figures showed the annual pace of inflation slowed to 1.6 percent from 1.8 percent at the end of the 2011 calendar year, with tradable inflation at 0.3 percent and non-tradable at 2.5 percent.
The biggest increase in consumer prices was from cigarettes and tobacco, which rose 14 percent, followed by a 2.3 percent gain in petrol prices, and a 0.9 percent rise in the price of housing rentals.
The price of insurance climbed 3 percent in the quarter, mainly on an 18 percent rise in dwelling insurance prices due to the increased Earthquake Commission levy to 15 cents per $100 of cover from a previous 5 cents. Contents insurance climbed 4.1 percent in the quarter.
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