New Zealand Inflation Q2 2016

New Zealand

New Zealand: Inflation remains stable in Q2

July 18, 2016

In Q2, consumer prices increased 0.4% over the previous quarter, which was faster than the 0.2% rise registered in Q1. Q2’s result fell short the 0.5% rise the markets had expected and, according to Statistics New Zealand, it reflected higher prices petrol and housing-related items, which were offset by lower prices for meat and domestic air fares. The statistical office commented also that the increase in petrol prices was the main contributor to Q2’s result as global oil prices have rallied from the lows registered earlier in the year.

Inflation stabilized at Q1’s 0.4% in Q2, which prompted annual average inflation to also remain unchanged at Q1’s 0.4% in Q2. Inflation remains well below the Reserve Bank of New Zealand’s 1.0%-3.0% inflation target range and June’s result suggests that the Central Bank may cut interest rates at the next policy meeting on 11 August.

According to its June Monetary Policy Statement, the Bank expects inflation to remain subdued and average 1.5% in the fiscal year 2016, which ends in March 2017. For FY 2017, the Bank expects inflation to average 1.5%. FocusEconomics Consensus Forecast panelists expect inflation to average 0.7% in 2016, which is unchanged from last month’s forecast. For 2017, the panel foresees that inflation will rise to 1.7%.

Author: Ricard Torné, Lead Economist

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New Zealand Inflation Chart

New Zealand Inflation Q2 2016 0

Note: Quarter-on-quarter and annual variation of consumer price index in %.
Source: Statistics New Zealand and FocusEconomics calculations.

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