NZ CPI Preview: Forecasts from four major banks, more inflation pain

Statistics New Zealand will release Q2 Consumer Price Index (CPI) inflation data on Sunday, July 17 at 22:45 GMT and as we get closer to the release time, here are forecasts from economists and researchers of four major banks regarding the upcoming growth data.

Economists expect the CPI to have jumped from 6.9% YoY to 7.1%. Meanwhile, the QoQ pace may have moderated to 1.5% from 1.8%.

ANZ

“We’re forecasting that annual CPI inflation hit 7.1% in Q2 – a slight increase from Q1’s already-strong 6.9% print. Uncertainty remains high, with global commodity prices being buffeted by geopolitical developments, and trading-partner inflation continuing to surge. Domestic inflation risks are firmly to the upside, given still-high inflation expectations and an extremely tight labour market. We expect annual non-tradables inflation remained high at 6.0%, while tradables are expected to have nudged up to 8.7% YoY (8.5% previously). The RBNZ is unlikely to find any comfort – and that should see another 50 bps hike delivered at the August MPS, despite downside growth risks piling up. If we were to see a non-negligible upside surprise to the CPI print, another 50 bps in October would be game on. The RBNZ has no leeway to take any chances on the inflation front.”

Westpac

“We expect the upcoming Consumers Price Index will show that New Zealand consumer prices rose by 1.4% in the June quarter. That would take annual inflation to 7.0%, up from 6.9% last quarter and the highest annual inflation rate in more than three decades. There have been particularly large increases in the prices of food, fuel and housing related costs. However, price pressures are bubbling over in every corner of the economy. Businesses are continuing to grapple with shortages of staff and supplies. But what has really lit a fire under consumer prices has been the strength of demand. Our forecast is in line with the RBNZ’s last set of published forecasts.”

Standard Chartered

“We expect YoY inflation to have remained elevated at 6.9%; however, on a QoQ basis, inflation likely moderated to 1.3% from 1.8% previously. Median house prices were down 3.4% QoQ in Q2, more than the 2.5% QoQ decline in Q1. Dubai oil prices rose at a slower pace of 12.3% QoQ in Q2 versus 24.9% QoQ in Q1. The NZD trade-weighted index depreciated by a slower pace of 0.7% QoQ in Q2 versus 2.2% QoQ in Q1. Finally, the food price index rose 1.4% QoQ in Q2 versus 3% QoQ in Q1. Our forecast is similar to the central bank’s forecast of 7.0% YoY in Q2.”

TDS

“The RBNZ expects CPI inflation to peak at 7.0% YoY in Q2'22 but we struggle with this optimistic view. We see further upside risks to NZ inflation from the passthrough of elevated PPIs to CPIs by offshore trading partners. We think another red-hot CPI print (we forecast 7.3% YoY) reinforces our call for a fourth consecutive 50 bps hike by the Bank at its August meeting.”