New Zealand Consumer Price Inflation Cools in Q2

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New Zealand consumer price inflation has shown signs of cooling in the second quarter, primarily due to a decrease in fuel costs. However, despite this moderation, the pace of price gains across the economy remains substantial, prompting the Reserve Bank of New Zealand to remain vigilant.

According to Stats NZ, the consumer price index increased by 6.0% on a yearly basis, with a quarterly rate of 1.1%. This quarterly rate slightly surpassed economists’ forecast of 1.0%.

While this data marks a decline from the 6.7% on-year increase seen in the first quarter, it is important to note that inflation pressures are still present in certain areas, belying signs of easing inflation in countries such as the U.S. and Canada.

The recent data supports the RBNZ’s decision to keep interest rates unchanged as the country grapples with a technical recession.

Areas of concern include food prices, which contributed the most to annual inflation. The increase in food prices can be attributed to rising costs of vegetables, ready-to-eat food, and milk, cheese, and eggs.

Vegetable prices experienced a significant increase of 23.3% over the past year, while ready-to-eat food and milk, cheese, and eggs saw increases of 9.8% and 13.8%, respectively.

Housing and household utilities also contributed significantly to the annual increase in inflation due to rising prices for construction and rents.

Building a new house witnessed an increase of 7.8% in the second quarter compared to the same period last year, following an 11.5% jump in the previous quarter. Rents increased by 4.2% on-year in the second quarter, slightly down from a 4.3% increase in the previous quarter.

Partially offsetting these increases were lower transport costs. Gasoline prices declined by 15.0% over the year, following an 8.3% fall in the second quarter.

In conclusion, New Zealand is experiencing a cooling of consumer price inflation in the second quarter, primarily due to lower fuel costs. However, certain areas such as food and housing continue to be a cause for concern. The Reserve Bank of New Zealand will need to closely monitor these developments moving forward.

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