VIEW: Westpac Revises Down Q4 CPI Forecast After Monthly Price Print

Westpac has revised down its Q4 CPI forecast to 0.3% q/q from 0.6% after the StatsNZ November prices update, which has been expanded to include not just food prices but also alcohol and tobacco, rents, transport (fuel, air transport) and accommodation. This covers 45% of the CPI. Westpac revised down its forecast due to soft air travel prices. It notes that there is now a downside risk to the RBNZ’s Q4 CPI forecast of 0.8% q/q.

• Westpac believes that while the RBNZ “will take some comfort from the easing in headline inflation”, “core inflation - especially for domestic prices - remains elevated. That means inflation is still set to remain far above the RBNZ’s target well into the new year”.
• Food prices fell 0.2% m/m (19% of CPI), housing rents +0.3% (9%), alcohol flat (7%), international airfares -3.7% after -7.5% in October (2%), and domestic fares +3.6% (0.7%).
• Food prices posted “a slightly smaller decrease than we expected, with seasonal falls in the prices of fresh produce offset by increases in beverage prices. Notably, we’re seeing continued softness in the prices of restaurant and takeaway food, consistent with comments from businesses in the industry of sluggish consumer spending.”