New Zealand CPI

Monday, 18 April 2011 10:05

Rising petrol prices helped push up inflation in the March quarter but the increase in the CPI was still below market expectations. Some economists are raising concerns that inflationary risks are rising and potential for rate hikes are possible. 

Figures out on Monday show a 0.8 % rise in the CPI in the March quarter and a 4.5 % rise for the year to March. Markets were expecting a 1 % rise over the quarter and a 4.6 % gain on the year. Transport group rose 2.5 % in the quarter, with a rise in petrol prices of 9.7 % being countered by a seasonal fall of 9.2 % in international airfares. Cigarette and tobacco prices rose 9.4 % in the March quarter, reflecting an 11.6 % increase in excise duty at the start of 2011.

Food prices rose 1.2 %, with prices for grocery food up 1.1 % and meat, poultry, and fish were up 2.1 %. The rise in grocery food prices reflected a 1.4 % rise in prices for bread and cereals, along with a 1.3 % rise in prices for the milk, cheese, and eggs group. The 4.5 % rise in the CPI for the year to the March quarter included a 2.3 % increase in the December quarter when GST rose from 12.5 to 15 %. Petrol prices rose 17.1 % in the year, while cigarette and tobacco prices rose 26.1 %, reflecting two rises in excise duty on both cigarettes and tobacco.

Underlying annual CPI inflation rose to 1.8 % from 1.6 % the previous quarter, basically in the middle of the Reserve Bank's 1-3 per cent target range. The inflation outlook for the second quarter is more of a concern with higher petrol prices, rises for dairy prices and electricity set to boost aggregate consumer prices. Weak domestic demand and Kiwi strength were keeping the price of imported consumption goods low.