CPI Consistent With RBNZ Forecast, Domestic Measures Sticky

Q2 CPI was higher than expected at 1.1% q/q and 6.0% y/y but was down from 6.7% in Q1 and the lowest annual rate since Q4 2021. The quarterly rise is in line with the RBNZ’s forecasts with the annual rate slightly lower. Even though the result is stronger than analysts expected and historically high, inflation is moderating and this data is unlikely to shift the RBNZ from its neutral stance. Its own measure of core inflation is out later today.

• Domestically-driven non-tradeables inflation rose 1.3% q/q to be 6.6% y/y higher supported by rents and construction. While still a robust pace, it is slowing with Q2 posting the lowest quarterly rise since Q2 2021 but the annual rate is proving stubborn (see chart). Services prices are sticky at 6.1% y/y. These domestic and wage-impacted price measures should continue to be monitored closely.
• The tradeables CPI rose 0.8% and 5.2% down from 6.4% in Q1 and the peak of 7.3% in Q2 2022. Goods prices eased to 6% y/y from 7%.
• Food prices made the largest contribution to inflation rising 12.3% y/y and was likely impacted by the early 2023 cyclones. CPI ex food was more moderate than other price measures rising 0.7% q/q and 4.6% y/y down from 5.6% in Q1 and the 7.4% peak.
• Construction costs for a new home rose 1.1% q/q but eased to 7.8% y/y from 11.5%. Rents rose 1.1% q/q and 4.2% y/y. Transport prices fell with petrol down 1.5% q/q and -15% y/y.

Source: MNI - Market News/Refinitiv