MNI ANALYSIS: New Zealand Q1 CPI Accelerates, Non-Tradable Up

--Y/Y CPI Slows Due to Base Effect But Remains Within RBNZ Band

By Sophia Rodrigues

     SYDNEY (MNI) -  - New Zealand's consumer price index inflation accelerated

in the first quarter due mainly to a rebound in food and household goods prices

and while the year-on-year rate slowed on account of higher base effect, it

remained within the Reserve Bank's 1% to 3% target band.

     The data was lower than MNI median forecast but was mostly in line with the

RBNZ's y/y forecast for +1.1%. 

     Non-tradable inflation accelerated in Q1 and the pace of decline in

tradable inflation slowed, both suggesting that inflation could pick up in

coming quarters. The data could lead to some upward revision in the RBNZ's CPI

projection and could suggest official cash rate may be raised earlier than

previously signalled.

     Data published by Statistics New Zealand Thursday showed CPI rose 0.5% q/y

and 1.1% y/y in Q1 compared with +0.1% q/q and +1.6% y/y in Q4. This was lower

than MNI median forecast for +0.4% q/q and +1.0% y/y.

     As expected, tertiary education was a drag on Q1 CPI due to the

introduction of the government's fee-free first year policy that applies to all

secondary students who finished school from 2017 onwards. This was mostly offset

by annual tobacco tax increase which pushed up prices by up to 10%. The

alcoholic and beverage group overall rose 4.3% q/q.

     The housing and household utilities group rose 0.6% q/q, the same pace as

Q4 but y/y accelerated slightly to +3.1% from +3.0%. The main upside surprise

was household contents and services group which rose 0.7% q/q after a 1.5% drop

in Q4. In y/y terms, the pace of decline slowed to -1.0% from -1.1%.

     Significantly non-tradable inflation less housing and household utilities

growth rose 1.2%, the fastest rate since Q1 of 2017 when it rose 1.4%. 

     Overall CPI without the housing and household utilities group rose 0.5% q/q

compared with 0.2% rise in Q4.

     The food group rose 0.5% q/q, more than rebounding from the 1.1% decline in

Q4. The trimmed mean CPI rose 0.5% in Q1, slowing from +0.6% in Q4 but in y/y

terms it accelerated to +1.1% from +0.9%.

     The RBNZ will publish its sectoral factor measure of inflation later

Thursday which will give a better indication of inflation pressures in the

economy.

     New Zealand Consumer Price Index for the first quarter published by

Statistics New Zealand Thursday:

                                                         Q1          Q4

-----------------------------------------------------------------------

                                                 (% change)  (% change)

Quarter-over-Quarter                                   +0.5        +0.1

MNI Median                        +0.4 (Range +0.1 to +0.7)

Year-over-Year                                         +1.1        +1.6

MNI Median                        +1.0 (Range +0.7 to +1.3)

Tradable Inflation (Q/Q, Y/Y)                    -0.1, -0.4  -0.3, +0.5

Nontradable Inflation (Q/Q, Y/Y)                 +0.9, +2.3  +0.5, +2.5

RBNZ Projection (Q/Q, Y/Y)                       +0.6, +1.1

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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