MNI ANALYSIS: New Zealand Q3 CPI Up But Core Still Subdued

--CPI Higher Than MNI Survey Median, RBNZ Projection

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

in the third quarter but outside of food and housing there was little sign of

inflation pressures in the economy.

     Q3 inflation rose 0.5% q/q and 1.9% y/y, data published Tuesday by

Statistics New Zealand Tuesday show. This was above the +0.4% q/q and +1.8% MNI

survey median forecast and well above the Reserve Bank of New Zealand's

projection of +0.2% q/q and +1.6% in its August Monetary Policy Statement.

     Despite the higher-than-expected outcome, the data are unlikely to change

the RBNZ's firmly neutral monetary policy stance, as core inflation remains well

below the mid-point of the central bank's 1% to 3% target band.

     The main contributor to inflation was food, which rose 1.1% q/q due mainly

to 6.2% rise in vegetable prices.  

     The other key contributor was the housing and household utilities group,

which rose 1.0% q/q, due to the yearly rise in local authority rates (up 3.5%)

and higher costs for housing rentals (up 0.6%) and the purchase of new housing

(up 1.1%). The main offset was transport prices, which fell 1.1% due to a drop

in petrol prices and international airfares.

     Non-tradable inflation rose 0.7% q/q, taking the y/y rise to +2.6% -- the

highest since Q2 of 2014.

     Core CPI, roughly headline inflation minus food and the energy group,

remained subdued, rising 1.5% y/y compared with the 1.4% gain in Q2 but below

the 1.6% increase in Q1.

     While the overall housing group remained the main contributor to inflation,

the pace of new housing purchases slowed to +1.1% q/q in Q3 from +1.8% in Q2.

The y/y pace slowed to +5.4% from +6.4% with Auckland slowing from +5.2% to

+4.4% -- the lowest since Q2 of 2016. 

     RBNZ will publish its sector factor measure of inflation later Tuesday

which will give a better indication of inflation pressures in the economy,

though it is unlikely it will accelerate significantly from the +1.4% y/y seen

in Q2.

     New Zealand Consumer Price Index for the third quarter published by

Statistics New Zealand Tuesday:

                                                         Q3          Q2

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

                                                 (% change)  (% change)

Quarter-over-Quarter                                   +0.5         0.0

MNI Consensus                     +0.4 (Range +0.3 to +0.6)

Year-over-Year                                         +1.9        +1.7

MNI Consensus                     +1.6 (Range +1.7 to +2.0)

Tradable Inflation (Q/Q, Y/Y)                    +0.2, +1.0  -0.2, +0.9

Nontradable Inflation (Q/Q, Y/Y)                 +0.7, +2.6  +0.2, +2.4

RBNZ Projection (Q/Q, Y/Y)                       +0.2, +1.6

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

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