Inflation up 0.8% in three months to March

New Zealand's consumer price index rose 0.8 percent in the March quarter and was up 4.5 percent in the year to March reflecting higher prices for petrol, cigarettes, tobacco, and food.

The Consumers Price Index (CPI) showed general prices were up 4.5% from the same quarter a year ago, Statistics NZ said this morning.

The rise fell short of median economist expectations of a 1% increase for the March quarter and a 4.7% annual increase.

The transport group rose 2.5% in the March quarter, with a rise in petrol prices of 9.7% being countered by a seasonal fall of 9.2% in international air fares.

"Petrol prices have increased strongly over the past six months and at the end of March were only slightly below their peak in July  2008," Statistics NZ prices manager Chris Pike said.

Cigarette and tobacco prices rose 9.4% in the quarter, reflecting an 11.6% increase in excise duty from January 1.

Food prices rose 1.2%, with prices for grocery food up 1.1% and meat, poultry, and fish up 2.1%. The increase in grocery food prices reflects higher prices for bread and cereals (up 1.4%), and milk, cheese, and eggs (up 1.3%).

TD Securities analyst Roland Randall said the data disappointed as the market was looking for much higher than Reserve Bank 0.7%/ forecast rise, explaining that was because since that prediction was forecast there has been substantial price rises for food fuel. 

"Inflation was affected, coming in above the RBNZ, but fell a long way short of the market consensus. The New Zealand dollar was over 80USc for the first time in this cycle going into the decision but promptly lost 30 pips on the print," he said.

"Nothing here will change the RBNZ’s intentions to keep monetary policy at ‘emergency’ levels (OCR was cut 50 basis points to 2.5% post- the February earthquake) for the rest of this year, while continuing to warn that this easy policy will be withdrawn just as soon as reconstruction gets underway in 2012," Mr Roland said.

Statistics NZ said significant rises contributing to the 4.5% rise in annual inflation rise came from higher prices for transport (up 8.2%), housing and household utilities (up 4.0%t), food (up 4.8%), and alcoholic beverages and tobacco (up 11.4%.

Petrol prices rose 17.1% in the year to the March 2011 quarter. Cigarette and tobacco prices  rose 26.1%, reflecting two increases in excise duty on both cigarettes and tobacco in late April 2010  and January 2011.

The March 2011 quarter CPI was not materially affected by the Christchurch earthquake on 22 February 2011, Statistics NZ said.