No big surprises as inflation rises 0.1% in Dec quarter and 1.9% in year to Dec; Annual price rises come off the back of higher transport and housing costs

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The consumer price index (CPI) rose 0.1% in the December quarter and 1.9% in the year to December, according to Statistics New Zealand.

This came as no surprise to financial markets, which expected lower oil prices to ease cost pressures and see the CPI go up a little less than forecast by the Reserve Bank (RBNZ).

The RBNZ in its November Monetary Policy Statement saw the CPI rising 0.2% in the December quarter and 2.0% in the year to December.

Stats NZ says the average price of petrol fell 0.6% in the December quarter, from the September quarter, when petrol prices were up 5.5%.

It notes the quarterly hike in the prices was led by typical seasonal rises in international airfares, which were largely offset by seasonal falls in vegetable prices.

As for the annual rise of inflation, which was the same as the year to September, Stats NZ says housing and utilities were the main contributor to this.

Rents rose 2.4% across the country in the year, construction prices were up 3.6%, local authority rates were up 5.1%, dwelling insurance up 15% and electricity prices up 2.1%.

Higher transport costs were the second largest contributor to annual inflation. This was driven by petrol prices (which eased in the December quarter) rising 11%.

Taking petrol out of the equation, the CPI rose 1.5% in the year to December.

Consumer prices index

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Source: Statistics NZ

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Source: Statistics NZ

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Source: Statistics NZ

Westpac senior economist Michael Gordon says: “Today’s release has no implications for our forecasts.

“Inflation is close to the 2% midpoint of the RBNZ’s target range; the recent plunge in fuel prices will drag the headline inflation rate down in early 2019, but the RBNZ will be able to look through this impact.

“We expect a gradual pick-up in domestic inflation pressures as the labour market tightens, but there is still some way to go before inflation tests the upper end of the target range.

“We expect the RBNZ to keep the OCR unchanged until late 2020.”

The release of the December quarter inflation data had a small impact on the New Zealand dollar, which rose from 67.2 US cents to 67.6 US cents.

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