NZ consumer prices rise 0.2 percent as cheap petrol keeps lid on housing pressures

New Zealand inflation printed just below expectations in the second quarter, as cheap imported petrol helped counter rising housing related prices, pushing the annual rate to a 14-year low.

The consumer price index rose 0.2% in the three months ended June 30, just shy of the 0.3% expected in a Reuters survey of economists, for an annual pace of 0.7%, according to Statistics New Zealand. That's the fourth quarter that the annual pace has been below the Reserve Bank's target 1% to 3% target band, and is the slowest annual pace since 1999.

Petrol prices fell 2.5% in the quarter, the biggest quarterly decline since September 2011, and were down 2.8% on an annual basis. Since the end of the quarter petrol prices have increased 5%

That offset a 1.1% increase in housing and household utilities prices. Housing and utilities prices rose an annual 3.1%. Newly built house prices rose 1.7% in the quarter for an annual pace of 4.1% and rental prices rose a quarterly 0.4%  and an annual 2.1%.

Electricity costs rose 2.6% in the June quarter for an annual increase of 3.4%. Dwelling insurance prices rose 9.9% in the quarter for an annual pace of 37%.

The tepid pace of inflation has meant the Reserve Bank hasn't had to hike the official cash rate from a record-low 2.5% as a bubbling property market fails to spill over into increased consumer spending. The central bank has been reluctant to lift the key rate as it might stoke investors to buy the kiwi, further strengthening an "over-valued" currency.

The kiwi dollar averaged 76.55 in the second quarter on a trade-weighted basis, below the Reserve Bank's projected 77.50. The TWI fell to 74.23 after the CPI report was released from 74.36 immediately before. The kiwi dipped to 77.94 US cents from 78.17 cents.

Tradable inflation, which includes goods and services facing international competition, shrank 0.5% in the June quarter, and fell 1.6% on an annual basis. Tradable prices are at the lowest level since the September 2010 quarter, just before the government hiked goods and services tax 2.5 percentage points to 15 %. Non-tradable inflation rose 0.6 percent in the quarter and was up an annual 2.5 percent.

Food prices rose 0.2% in the quarter, led by a 7% increase in vegetable prices. On an annual basis, food prices rose 0.2%. Grocery food prices shrank 0.2% in the quarter and were down 1.5% on an annual basis.

Retailers trimmed their level of discounting in the quarter, with 14% of stock sold at a lower price compared to 16% in the March period. Clothing and footwear showed the biggest pull back with 15% sold at a discount compared to 22% in March.

(BusinessDesk)