Consumer Price Index up 0.8% in three months

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Higher housing costs, fuel and car prices, have driven a solid lift in consumer prices at the start of the year.

Petrol prices rose 7.2 percent in the three months to the end of March.
Photo: RNZ / Dan Cook

The consumer price index rose 0.8 percent in the three months ended March, lifting the annual inflation rate marginally to 1.5 percent.

“Global oil prices plunged in early 2020 as the Covid-19 pandemic took hold. Prices have risen since then,” Stats NZ prices senior manager Aaron Beck said.

Petrol prices rose 7.2 percent, the biggest quarterly rise since mid-2015, while new and used car prices rose at the fastest pace in more thsan eight years.

“There have been many delays with imports of goods into New Zealand. This may have resulted in fewer cars available for sale,” Beck said, adding that consumers may have diverted money intended for overseas travel to car buying.

The costs of building a new house continued to rise unabated, rising 1.2 percent during the quarter, with rents rising 1 percent.

“Reported shortages of many building products such as timber and house fittings and furnishings, as well as higher labour costs likely contributed to the movement,” Beck said.

The main price falls were seen in electronics, telecommunication services, furnishings, and meat.

The overall inflation pressures were much in line with analysts’ expectations, although a touch below the Reserve Bank’s pick.

ASB senior economist Mark Smith said the inflation pulse was likely to quicken in the months ahead.

“We expect annual headline inflation to move above 2 percent for much of the rest of this year and next as a perfect storm of stretched capacity, supply bottlenecks, and higher costs flow through in consumer prices.”

This would take the annual rate above the Reserve Bank’s target, but it is not expected to change the central bank’s view on interest rates or other easy policy measures put in place to support the economy during the pandemic.

“We expect the RBNZ to remain patient and defer from raising the OCR (official cash rate) until it is confident the expansion is secure, the economy is close to full employment and medium-term inflation drivers are pointing well above 2 percent.”

“This still some way away and we have pencilled in August 2022, with risks of a later start to OCR hikes,” Smith said.

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