Sharechat Logo

Inflation peaked in third quarter as economy slowed

Friday 17th October 2008

Text too small?
New Zealand inflation probably peaked in the third quarter as the central bank predicted, boosting the prospects for the steepest easing in monetary policy since the official cash rate was introduced in 1999.

Consumer prices rose 1.5% in the third quarter for an annual pace of 5.1%, an 18-year high, according to the consensus of estimates collected by Reuters. Prices of food, petrol, electricity and government charges drove the acceleration in annual inflation.

The Reserve Bank last month cut the OCR by a greater-than-expected 50 basis points while forecasting annual inflation would reach 4.9% in the latest three months. Governor Alan Bollard on Sept. 11 said a marked slowdown in the local economy and deteriorating world growth would cool inflation. Since then, Evidence has mounted that the US is lurching into recession and the global economy may be heading for a prolonged slump.

"Inflation concerns are receding rapidly," Westpac chief economist Brendan O'Donovan said in a report. "A worsening economic outlook as the international credit crunch bites will see previous capacity constraints relax."

The New Zealand dollar has declined about 8% this month and may extend its slide with the prospect of lower interest rates, falling commodity prices and weakening world demand.

"We don't expect the September quarter CPI print to get in the way of an aggressive easing cycle from the RBNZ," ANZ Bank economists said in a report yesterday.

The consensus of economists is for Bollard to reduce the OCR by 100 basis points to 6.5% on October 23 and to flag the potential for more reductions to revive an economy that may be in its fourth quarter of contraction.

A survey yesterday showed New Zealand manufacturing activity fell in September, its fifth monthly decline as companies trimmed production and got fewer orders.

By Jonathan Underhill

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Tourism Holdings Limited (NZX: THL) thl to acquire MaxiTRANS NZ
NZ Compare announces the acquisition of PriceMe
25th January 2022 Morning Report
Fonterra Shareholders Fund (NZX: FSF) Fonterra lifts forecast Farmgate Milk Price range
Green Cross Health Limited (NZX: GXH) Trading update
Ebos Group Limited (NZX: EBO) Retail Offer Oversubscribed
24th January 2022 Morning Report
ArborGen Holdings Limited (NZX: ARB) Updates Market on FY22 Guidance
My Food Bag Group Limited (NZX: MFB) Q3 FY22 Trading Update
ikeGPS Group Limited (NZX: IKE) signs $0.9m deal with tier-1 electric utility