New Zealand: Inflation shoots up to +10-year highs – UOB

Economist at UOB Group Lee Sue Ann reviews the latest inflation figures in New Zealand.

Key Takeaways

“Consumer prices in New Zealand climbed 2.2% q/q in the third quarter, surpassing expectations for a gain of 1.5% q/q, and much higher than the 1.3% q/q print in the second quarter… Excluding quarters impacted by increases to GST rates, the September quarter movement was the highest since the June 1987 quarter, which saw a 3.3% q/q rise.”

“Compared to the same period a year ago, CPI advanced 4.9% y/y, the biggest annual movement since inflation reached 5.3% between the June 2010 and June 2011 quarters. Excluding periods impacted by changes to GST rates, the latest annual inflation reading was the highest since it reached 5.1% y/y in 3Q08. The spike was well above the consensus forecast of 4.2% y/y, and 0.8ppts higher than the Reserve Bank of New Zealand (RBNZ)’s forecast in its August Monetary Policy Statement.” 

“Going forward, inflationary pressures will likely be supported by rising oil and food prices, construction costs, as well as the ongoing supply disruptions. That said, further out, when borders reopen, a rebound in labor supply will likely see a return of labor market slack. This will ease pressures on wages, while price pressures from global supply disruptions ease. We previously highlighted our cautious view as far as the pace of rate hikes is concerned.”