VIEW: Westpac Thinks April Data Signal Upside Risks To Q2 CPI

April data covering 45% of the CPI were released today with food prices +0.6% m/m driven by groceries, meat and takeaway. Rents rose 0.5% m/m to be +4.6% y/y but there are signs of “some easing in new rental agreements”. Petrol prices rose 1.8% m/m and there were “some big seasonal swings in the volatile travel categories”. Westpac sees today’s data indicating that there’s an upside risk to the RBNZ’s 0.6% q/q forecast for Q2 CPI, “on balance”.

• “Looking through the month-to-month volatility, while lower import prices have pulled down inflation, today’s data highlights the continued firmness in domestic prices such as rents. As a result, we continue to expect a gradual easing in overall inflation. Inflation is only likely to drop below 3% late this year, and a return to the 2% target is still a way off.”
• “On its own, today’s update probably won’t have been a big surprise for the RBNZ. However, it follows the March quarter result that was stronger than they had expected. Overall, the RBNZ is looking at a firmer inflation outlook than they had assumed when they last published forecasts in February.”