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Non-Tradeables & Core CPIs Key For Rate Outlook

NEW ZEALAND
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Q2 NZ CPI prints on Wednesday and Bloomberg consensus expects headline to moderate to 0.5% q/q and 3.4% y/y from 0.6% and 4% in Q1, while the RBNZ forecast in May that it would ease to 3.6% y/y with a 0.6% quarterly rise. It will present revised forecasts at its August 14 meeting and the Q2 CPI will be important in determining if the return to target is brought forward and thus also the first rate cut in the OCR profile. But it will be core and non-tradeables that will determine if it cuts in August.

  • Headline forecasts are in a reasonable range with Bloomberg consensus between +0.3% and 0.6% q/q and 3.2-3.6% y/y.
  • The non-tradeables CPI will be watched closely as it is domestically driven. Consensus is at 0.8% q/q, in line with the RBNZ, with forecasts between +0.7% and +1.0% q/q. Tradeables expectations are expected to rise 0.1% q/q, below the RBNZ’s 0.3%, as demand has slowed materially.
  • The local banks’ headline forecasts are varied with Kiwibank at consensus but ANZ and ASB below at 0.4% q/q and 3.3% y/y, while BNZ and Westpac are above with 0.6%/3.5%.
  • The RBNZ’s measure of core from its sector factor model is also published on Wednesday and ANZ expects it to fall below 4%. The release includes underlying non-tradeables inflation too. A significant move lower in these measures would be needed for the RBNZ to ease policy as soon as August.
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Q2 NZ CPI prints on Wednesday and Bloomberg consensus expects headline to moderate to 0.5% q/q and 3.4% y/y from 0.6% and 4% in Q1, while the RBNZ forecast in May that it would ease to 3.6% y/y with a 0.6% quarterly rise. It will present revised forecasts at its August 14 meeting and the Q2 CPI will be important in determining if the return to target is brought forward and thus also the first rate cut in the OCR profile. But it will be core and non-tradeables that will determine if it cuts in August.

  • Headline forecasts are in a reasonable range with Bloomberg consensus between +0.3% and 0.6% q/q and 3.2-3.6% y/y.
  • The non-tradeables CPI will be watched closely as it is domestically driven. Consensus is at 0.8% q/q, in line with the RBNZ, with forecasts between +0.7% and +1.0% q/q. Tradeables expectations are expected to rise 0.1% q/q, below the RBNZ’s 0.3%, as demand has slowed materially.
  • The local banks’ headline forecasts are varied with Kiwibank at consensus but ANZ and ASB below at 0.4% q/q and 3.3% y/y, while BNZ and Westpac are above with 0.6%/3.5%.
  • The RBNZ’s measure of core from its sector factor model is also published on Wednesday and ANZ expects it to fall below 4%. The release includes underlying non-tradeables inflation too. A significant move lower in these measures would be needed for the RBNZ to ease policy as soon as August.