New Zealand's annual inflation slowed to 3.7 percent in the September quarter, down from 4.1 percent in the year to June and below both market expectations of 3.8 percent and the Reserve Bank of New Zealand's (RBNZ) forecast of 3.9 percent, official Stats NZ data showed on Thursday. Prices rose 0.7 percent in the quarter, down sharply from 1.5 percent in the June quarter, Westpac and FXStreet reported.
Lower fuel prices did most of the work. The average price of 91-octane petrol was 6.5 percent lower in the September quarter than in the June quarter, when prices had rocketed higher in the wake of the Middle East conflict, and diesel prices were close to 16 percent lower — moves Westpac estimated took about 0.4 percentage points off quarterly inflation. But petrol was still 19.1 percent more expensive than a year earlier and remained the largest individual contributor to the annual rate; Stats NZ estimated annual inflation would have risen 3.2 percent without the year's petrol increase.
Other prices pushed the other way. International airfares jumped 14.3 percent in the quarter and domestic airfares nearly 8 percent, vegetables rose 10.5 percent and local authority rates rose 6.2 percent. Measures of underlying inflation also firmed: the 30 percent trimmed mean rose to 3.0 percent, the weighted median to 3.1 percent, and the share of the consumer basket recording annual price rises above 3 percent surged from 38.5 percent to 54.9 percent, Westpac's analysis of the Stats NZ data showed.
Westpac said the details left markets pricing a strong chance of another RBNZ rate hike at next Wednesday's (October 28) policy review, and changed its own call to expect the central bank to deliver the hike then rather than pause. ASB forecasts inflation picking up again to 4.5 percent by year-end as fuel prices rise once more amid Middle East energy disruption. Headline inflation remains above the RBNZ's 1 to 3 percent target band, and the release was the last major data point before the rate decision, ahead of New Zealand's closely contested November 7 general election, investingLive reported.