Data shows smallest annual rise since mid-2021
The annual rate of inflation has dropped for a fourth consecutive quarter, according to the latest data released by Statistics New Zealand.
Consumer Price Index (CPI) figures, released on Wednesday morning, show that annual inflation reached 4.7% over the December 2023 quarter.
It marks the first time since December 2021 that inflation has fallen below 5%.
On a quarterly basis, inflation rose by 0.5%, down from 1.8% over the September 2023 quarter.
The latest inflation figures, released by Statistics NZ on Wednesday morning, are in line with Westpac and ANZ forecasts, which also showed an annual inflation rate of 4.7%.
Statistics New Zealand consumer prices senior manager Nicola Growden (pictured above) said that while this was the “smallest annual rise in over two years,” inflation remained above the Reserve Bank’s target range of 1% to 3%.
Housing and household utilities were the largest contributor to the annual inflation rate, driven by higher prices for rent, construction and rates.
Food was the second-largest contributor, which StatsNZ said was due to rising prices for ready-to-eat food (up 7.3% in the 12 months to December) and confectionary, nuts and snacks. Alcohol and tobacco was the next largest contributor.
Rental prices up 4.5% on same time last year
StatsNZ figures showed that rent prices increased 4.5% over the year to December. Construction price were up 3.6%, and rates were up 9.8%.
“The price of housing increased over 2023. Rent is 4.5% more expensive than at the end of last year,” Growden said.
“While the price increase in building a new house has fallen to 3.6%, it is 41% more expensive than pre-pandemic.”
Non-tradeable inflation (services, non-shipped goods, wages), considered by economists as stickier than tradeables inflation - and a focus for the Reserve Bank - was 5.9% in the 12 months to the December quarter (down from 6.3% in the September quarter), driven by rent, construction, cigarettes and tobacco.
Tradable inflation (imported goods and services) was 3%, driven by confectionary, nuts and snacks, offset by lower prices for international air transport.
At its November meeting, Reserve Bank governor Adrian Orr acknowledged that consumer price inflation was declining but said that given core inflation was elevated, inflationary pressures were a concern.
“If inflationary pressures were to be stronger than anticipated, the OCR would likely need to increase further,” Orr said.
Kiwibank chief economist Jarrod Kerr said that Wednesday's inflation figures showed that inflation was "heading in the right direction" and on track to hitting the top of the RBNZ's target band by the second half of this year.
"The current state of play and the outlook should be sufficient to see the RBNZ pivot away from rate hikes," he said in a media update.
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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