New Zealand Inflation Q1 2017

New Zealand

New Zealand: Inflation spikes in Q1 to over five-year high

April 20, 2017

In Q1, consumer prices jumped from the revised quarter-on-quarter seasonally-adjusted 0.4% increase observed in Q4 (previously reported: +0.3% qoq) to 1.0%. According to Statistics New Zealand, the increase reflected higher prices for food and alcoholic beverages and tobacco. Q1’s print, which marked the strongest increase since Q4 2010, surprised market analysts who had expected a softer increase to 0.8%.

In Q1, inflation jumped from a 1.3% print in Q4 to 2.2%, an over five-year high. The first quarter reading marks the highest reading since Q3 2011 and is now slightly above the middle of the Reserve Bank of New Zealand’s inflation target range of 1.0%-3.0%.

It remains to be seen how the latest inflation reading will affect the RBNZ's rate hike schedule. Although headline inflation has reached the 2.0% threshold more than two years earlier than the current Bank estimate, forward guidance provided by the Bank at its 23 March meeting was extremely dovish. The RBNZ considers taking a prudent approach to monetary policy amid an uncertain international economic outlook.

According to its February Monetary Policy Statement, the Bank expects inflation to remain subdued and to average 1.3% in the fiscal year 2017, which ends in March 2018. For FY 2018, the Bank expects inflation to average 1.9%. FocusEconomics Consensus Forecast panelists expect inflation to average 1.6% in 2017, which is unchanged from last month’s forecast. For 2018, the panel foresees inflation rising to 1.8%.


Author: Jean-Philippe Pourcelot, Economist

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New Zealand Inflation Chart


New Zealand Inflation Q1 2017

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


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