NEW ZEALAND: Non-Tradeables Lowest Since 2021, Feb 50bp Rate Cut Likely

Q4 NZ CPI was close to Bloomberg consensus expectations at 0.5% q/q and 2.2% y/y after 0.6% & 2.2% in Q3, above the RBNZ’s November forecast of 0.4% & 2.1%. The slightly higher outcome was driven by international airfares with the volatile component accounting for almost a quarter of the quarterly increase. With the data printing close to the RBNZ’s projections and non-tradeables easing, another 50bp cut on February 19 seems likely given the weakness of the economy.

• Headline inflation was impacted by a number of volatile components, such as airfares & cars, and so the underlying measures are likely to be the focus of the RBNZ with its own sector factor model estimates due at 1500 NZDT (1300 AEDT) today.
• Domestically-driven non-tradeables were slightly lower than expected rising 0.7% q/q and 4.5% y/y, the lowest quarterly rate since Q3 2020, and below the RBNZ’s projections of 0.8% & 4.7%. It rose 1.3% q/q and 4.9% y/y in Q3. Rents continue to grow strongly rising 0.8% q/q making a 15% contribution to Q4 CPI. Services prices rose 1.4% q/q and picked up to 4.8% y/y from 4.5%, still elevated.
• Stats NZ notes that excluding petrol prices, which fell 9.2% y/y, headline inflation would have been higher at 2.7% y/y.
• Vegetable prices were down 14.6% y/y. Thus the CPI ex food rose 0.8% q/q and 2.4% y/y.
• Tradeables were higher at +0.3% q/q but still down 1.1% y/y after -0.2% & -1.6%. This quarterly rise was the first since Q3 2023 suggesting that the disinflationary impact from goods prices is over. It was also higher than the RBNZ projected (-0.2% & -1.5%). Goods prices were flat though to be up 0.6% y/y. 

NZ CPI y/y%