Economy

NZ inflation slows more than expected, rates seen on hold

NZ inflation slows more than expected, rates seen on hold”

The New Zealand Dollar subsequently fell against all of its major counterparts by more than half of a percent, and as much as 0.6 percent against the US Dollar.

"Household basics like rent, food, and electricity all hit consumers' pockets harder this quarter", prices senior manager Jason Attewell said.

The RBNZ had forecast inflation of 0.3 per cent on a quarterly basis and 2.1 per cent on an annual basis for the second quarter of 2017.

"Core inflation is still above the low point of 0.9% reached in 2015, but the drop highlights that even decent rates of economic growth aren't enough to generate much inflation", said Paul Dales, chief Australia and New Zealand economist at Capital Economics. At the June rate review, Reserve Bank governor Graeme Wheeler kept the official cash rate at 1.75 per cent and said the bank viewed a recent pickup in inflation as a temporary spike in the tradables sector. The figures may dispel speculation the RBNZ would be encouraged to hike rates in keeping with central banks such as Canada's.

Transport prices (down 1.3 percent) made the largest downward contribution this quarter. The average price of 1 litre of 91 octane petrol was $1.86 in the June quarter, down from $1.90 in the March quarter but up from $1.78 in the June quarter a year earlier. Domestic airfares were down 14.5 per cent on the quarter while global air transport rose 3.7 per cent.

The economy gained 0.5% in the first quarter, which was below the consensus forecast calling for a 0.7% increase.

Higher vegetables prices pushed food inflation up 0.7 percent in the June 2017 quarter to 2.0 percent for the June 2017 year. Housing rentals rose slightly (up 0.4 percent), held down by a 1.6 percent fall for Canterbury. Dairy export prices helped Wellington post its best terms of trade in 44 years during the quarter.

"Housing and household utilities increased 3.1%, with purchase of new housing up 6.4%", it said.



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