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NEW ZEALAND: Inflation Back Into RBNZ Target Band, Non-Tradables Easing Slowly

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Q3 NZ CPI came in slightly below forecasts at 0.6%q/q (mkt consensus was 0.7%, while the RBNZ projected a 0.8% rise). The Q2 outcome was 0.4%. In y/y terms inflation was 2.2%, in line with market expectations, while the RNZ projected a 2.3% rise. Tradables were slightly below expectations at -0.2%q/q (-0.1% forecast, -0.5% prior), while non-tradables were in line at 1.3%q/q (prior 0.9%). the RBNZ forecast non-tradables at 1.4%.  

  • Annual headline inflation is back within the RBNZ's 1-3% target band for the first time since early 2021. Non-tradabables inflation, a measure of domestic price pressures is still quite elevated in y/y terms, back to 4.9% for Q3. This is comfortably above longer term averages.
  • Still, measures of core inflation like the trimmed mean eased to 2.5%y/y in Q3 from 3.7%, while the weighted median was at 2.8% y/y in Q3 from 3.5% prior. Ex fuel, food and energy costs is back to 3.1%y/y from 3.4%.
  • This is likely to provide some re-assurance to the RBNZ of softening in aggregate price pressures. There will be watch points for the RBNZ in terms of the stickiness of domestic price pressures, but this is unlikely to prevent the central bank form easing further in the near term, as adjusts settings back closer towards more neutral levels. 
     

Fig 1: Measures Of NZ Inflation (Pink is Headline, White is Non-tradables, Other Measures Are Trimmed & Weighted Median)

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Q3 NZ CPI came in slightly below forecasts at 0.6%q/q (mkt consensus was 0.7%, while the RBNZ projected a 0.8% rise). The Q2 outcome was 0.4%. In y/y terms inflation was 2.2%, in line with market expectations, while the RNZ projected a 2.3% rise. Tradables were slightly below expectations at -0.2%q/q (-0.1% forecast, -0.5% prior), while non-tradables were in line at 1.3%q/q (prior 0.9%). the RBNZ forecast non-tradables at 1.4%.  

  • Annual headline inflation is back within the RBNZ's 1-3% target band for the first time since early 2021. Non-tradabables inflation, a measure of domestic price pressures is still quite elevated in y/y terms, back to 4.9% for Q3. This is comfortably above longer term averages.
  • Still, measures of core inflation like the trimmed mean eased to 2.5%y/y in Q3 from 3.7%, while the weighted median was at 2.8% y/y in Q3 from 3.5% prior. Ex fuel, food and energy costs is back to 3.1%y/y from 3.4%.
  • This is likely to provide some re-assurance to the RBNZ of softening in aggregate price pressures. There will be watch points for the RBNZ in terms of the stickiness of domestic price pressures, but this is unlikely to prevent the central bank form easing further in the near term, as adjusts settings back closer towards more neutral levels. 
     

Fig 1: Measures Of NZ Inflation (Pink is Headline, White is Non-tradables, Other Measures Are Trimmed & Weighted Median)

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