New Zealand: Inflation rises to highest level in two decades
July 28, 2011
In the second quarter, consumer prices jumped 1.0% over the previous quarter, which was above the 0.8% increase tallied in the first quarter and defied market expectations, which had consumer prices rising 0.8%. According to the National Statistics Office, the main drivers behind the quarterly rise were higher prices for petrol (+4.0% quarter-on-quarter) and food (+1.1% qoq) as well as prices for electricity (+2.7% qoq). As a result of the quarterly jump observed in the second quarter, annual headline inflation climbed from 4.5% in the first quarter to 5.3% in the second, driving inflation to its highest level in two decades and well above the Central Bank's inflation target of 2.0% 1.0%. Going forward, reconstruction spending is expected to add pressure on consumer prices in the months ahead. Therefore, the Central Bank expects that inflation will overshoot its target and average 4.5% in the fiscal year 2011 (ending in March 2012) but to fall back to 2.0% in fiscal 2012.
Author: Ricardo Aceves, Senior Economist