MNI DATA ANALYSIS: New Zealand Q2 CPI Slows On Non-Tradables

--Non-Tradables Up Just 0.1% Q/Q Outside Housing and Household Utilities

By Sophia Rodrigues

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

the second quarter due mainly to slowing in non-tradable inflation, thus

supporting a hold-for-longer monetary policy stance by the Reserve Bank.

     The data could prompt market to further raise pricing for RBNZ cut, given

continued weakness in business confidence and recent fall in manufacturing and

services indexes.

     Data published by Statistics New Zealand Tuesday showed CPI rose 0.4% q/q

in Q2, falling short of MNI median forecast for a 0.5% rise but meeting the

RBNZ's forecast. In y/y terms, however, CPI fell short of both the MNI median

and RBNZ forecast with a 1.5% rise versus 1.6% forecast.

     In Q2, CPI slowed from 0.5% q/q in Q1 due mainly to non-tradable inflation

which rose just 0.4% q/q compared with 0.9% in Q1. This was the slowest pace of

inflation since 0.2% q/q in Q2 last year.

     Tradable inflation accelerated in Q2, rising 0.3% q/q versus -0.1% in Q1

and y/y pace moved to positive at +0.1% y/y compared with -0.4% in Q1. Still,

the 0.1% y/y pace was the second lowest in six quarters.

     The main source of inflation came from the housing and household utilities

group which rose 0.9% q/q compared with 0.6% in Q1. This was mainly due to a

rise in rents, construction and energy costs. The increase in construction costs

came outside Auckland which saw a 1.4% q/q rise, the highest in seven quarters.

In Auckland, construction costs accelerated to 0.6% q/q from 0.3% in Q1 but this

was well below the average 1.6% rise seen in the last 21 quarters and was only

the second-highest increase during this period.

     Higher premiums, fire service, and earthquake levies across the year all

contributed to an 18% increase in dwelling insurance during the year.

     Petrol prices rose 3.2% q/q but this was mostly offset by lower prices for

used cars. Tradables CPI less vehicle fuels fell 0.1% q/q and was down for three

quarters in a row, indicating continued disinflationary pulse from offshore.

     Non-tradables inflation less housing and household utilities rose just

0.1%, slowing sharply from 1.2% rise in Q1 which was the fastest rate since Q1

of 2017.

     The food group rose 0.8% q/q due mainly to higher prices for fruit and

vegetables, and increase in takeaway and restaurant meal prices.

     The RBNZ will publish its sectoral factor measure of inflation later

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

economy.

     New Zealand Consumer Price Index for the second quarter published by

Statistics New Zealand Thursday:

                                                         Q2          Q1

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

                                                 (% change)  (% change)

Quarter-over-Quarter                                   +0.4        +0.5

MNI Median                        +0.5 (Range +0.1 to +0.6)

Year-over-Year                                         +1.5        +1.1

MNI Median                        +1.6 (Range +1.2 to +1.7)

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

Nontradable Inflation (Q/Q, Y/Y)                 +0.4, +2.5  +0.9, +2.3

RBNZ Projection (Q/Q, Y/Y)                       +0.4, +1.6

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

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