Annual NZ consumer prices rise 2.2% in 1Q, fastest lift since Sept 2011
New Zealand consumer prices rose at their fastest annual pace in five-and-a-half years in the first quarter of 2017 as rising fuel prices, a tax on cigarettes and tobacco and the hot housing market stoked inflation.
The kiwi dollar rose to 70.34 US cents from 70.03 immediately prior to the release.
The consumers price index rose 1 percent in the three months to March 31 for an annual pace of 2.2 percent, Statistics New Zealand said. It was highest annual increase since the September 2011 quarter and also marked the first time inflation has hit the mid-point of the central bank's 1 percent-to-3 percent target range since that period.
Economists had tipped the CPI to lift 0.8 percent in the first three months of the year, for an annual rate of 2 percent, according to the median in a BusinessDesk poll.
The central bank, meanwhile, had forecast inflation of 0.3 percent in the first quarter for an annual rise of 1.5 percent. It wasn't expecting inflation to be 2 percent until 2019, according to its latest forecast.
"Rising petrol prices along with the annual rise in cigarette and tobacco tax lifted inflation," prices senior manager Jason Attewell said. "Petrol prices in New Zealand are closely linked to global oil prices, and cigarettes and tobacco taxes rise in the March quarter each year."
Petrol prices rose 4.1 percent in the quarter and were up 12 percent on the year. A slump in oil prices and resilient New Zealand dollar has kept a lid on headline CPI, however, inflation pressures are emerging as the dollar loses ground and fuel prices rise.
Alcoholic beverages and tobacco prices rose 4 percent on quarter in the March quarter, influenced by a 9.7 percent increase in cigarette and tobacco prices. The average price of 25 cigarettes was $31.60 in March versus $28.82 in December last year, StatsNZ said. They were up 3.9 percent on the year.
The quarterly rise in inflation was also boosted by higher food prices, which rose 2.2 percent on the quarter on the back of a 16 percent jump in the price of fruit. Food prices were up 1.6 percent on the year.
Cheap oil in recent years and the tepid inflation environment has made life difficult for New Zealand's Reserve Bank, which delayed cutting interest rates too aggressively for fear of stoking demand for an already hot property market. The central bank kept interest rates at a record low 1.75 percent in March and reiterated that they are expected to stay at that level "for a considerable period".
Today's data showed that housing-related prices continued to increase, up 0. 6 percent on the quarter and 3.3 percent on the year. Prices for new housing rose 1 percent in the March quarter for an annual increase of 6.7 percent. Rental prices were more sedate, with a quarterly increase of 0.8 percent for an annual gain of 2.3 percent.
Local body rates were up 0.1 percent on the quarter and were up 3.2 percent on the year while refuse disposal and recycling was up 2.2 on the quarter and 6.2 percent on the year. Household energy, which includes electricity, gas and solid fuels inched up 0.1 percent on the quarter and 2.3 percent on the year.
Tradeables inflation, which includes goods and services that compete with international rivals, rose 0.8 percent in the quarter and 1.6 percent on the year. Non-tradeables inflation, which focuses on domestic inflation, rose 1 percent on the quarter and was up 2.5 percent on the year.