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REPEAT: MNI ANALYSIS: RBNZ's Core Inflation At 7-Year High

Repeats Story Initially Transmitted at 03:23 GMT Jul 17/23:23 EST Jul 16
By Sophia Rodrigues
     SYDNEY (MNI) - Annual Core inflation in New Zealand accelerated for the
third straight quarter and recorded the largest increase since 2011 due mainly
to an increase in non-tradable inflation.
     Data published by the Reserve Bank of New Zealand Tuesday showed its
preferred measure of core inflation -- the sectoral factor model -- rose 1.7%
y/y in Q2 compared with an upwardly revised 1.6% rise in Q1, and 1.5% increase
in Q4 last year.
     The 1.7% y/y increase was the largest since Q2 of 2011 when sectoral factor
model measure of inflation rose 1.7%. The factor model of inflation rose 1.8%
y/y in Q2, accelerating from 1.6% rise in Q1.
     The data is derived from consumer price index inflation published by
Statistics New Zealand earlier Tuesday which showed a slowing in Q2 CPI in q/q
terms but an acceleration in y/y terms to +1.5% from +1.1% in Q1.
     The data removes downside risk to the RBNZ's official cash rate for now,
but the outlook for monetary policy would depend on the growth prospects for the
domestic economy which is showing signs of faltering, and also for global
growth.
     The acceleration in sectoral model inflation was mainly due to rise in the
non-tradable component which rose 2.7% in Q2, marking the fastest pace since Q3
of 2011. The tradable component has risen 0.5% y/y for three straight quarters.
     The RBNZ's sectoral factor model of core inflation separates components of
the CPI into tradables and non-tradables. By distinguishing between these two
sectors, the prices of which are widely regarded as being influenced by
different things, the model allows an interpretation of what is driving core
inflation, according to the RBNZ.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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