Lower retail prices offset petrol hikes

Prices rose 0.1 percent in the December 2017 quarter, Stats NZ said today. Higher petrol prices, air fares, and housing-related costs were countered by lower prices for vegetables, new cars, and a range of household goods.

The relatively flat result this quarter leaves the consumers price index (CPI) inflation rate at 1.6 percent for the December 2017 year. Inflation was 1.9 percent for the September 2017 year.

Inflation is a key measure for the Reserve Bank in setting interest rates and is commonly used in adjusting pay rates and other contracts.

Petrol price rise leads quarterly inflation

Transport rose 3.2 percent in the December 2017 quarter, influenced by higher petrol prices (up 6.1 percent) and international air fares (up 11 percent).

"Petrol prices were up in the December quarter, following two quarters of falls," prices senior manager Jason Attewell said. "Rising oil prices and a falling exchange rate pushed prices up sharply between July and November this year. The average price for 91 octane petrol hit $1.94 in the December 2017 quarter, up from $1.83 in the September 2017 quarter."

There was regional variation in petrol price movements in the December quarter, with Auckland prices up 5.8 percent while Wellington and Canterbury prices rose by more, up 7.1 and 6.8 percent, respectively.

Housing-related costs continue to rise

Housing and household-related prices were a large contributor to inflation in the December 2017 quarter, influenced by higher prices for construction and rent.

Construction prices rose 1.3 percent in the December quarter. In the year to December 2017, construction prices rose 5.3 percent across New Zealand, led by a 6.5 percent increase in Auckland. Prices also rose 3.1 percent in Wellington, and 5.8 percent in the rest of the North Island.

Rent prices rose 0.5 percent in the December 2017 quarter, with increases in most regions countered by flat prices in Canterbury. In the year to December 2017, rental prices increased 2.3 percent across New Zealand, led by a 3.6 percent increase in Wellington.

"For most longer-term renters, prices tend to stay about the same from year to year, while rents may rise more as tenancies change hands," Mr Attewell said. "Around 40 percent of properties surveyed showed no price change over the year."

Seasonal falls and specials keep retail prices down

Food prices fell 1.7 percent in the December 2017 quarter (up 0.2 percent after seasonal adjustment), influenced by seasonally lower vegetable prices (down 19 percent). Prices fell for tomatoes, lettuce, and other salad foods.

"Retail prices fell by more than usual in the December 2017 quarter, contributing to lower inflation than widely expected," Mr Attewell said. "Changing retail pricing strategies have led to lower prices for a range of household items, while specials drove new car prices down 6.2 percent."

Household contents and services prices fell 1.5 percent in the quarter, influenced by lower prices for glassware and tableware (down 6.2 percent), and major household appliances (down 2.8 percent). Clothing prices fell 1.8 percent, led by lower prices for women’s clothing (down 2.3 percent).

The relative importance of items has changed in the December 2017 quarter as a result of the 2017 CPI review.

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