NZ: Consumer Price Index

Wed Jul 15 17:45:00 CDT 2015

Consensus Actual Previous
Q/Q percent change 0.5% 0.4% -0.3%
Y/Y percent change 0.3% 0.3% 0.1%

June quarter consumer price index was up 0.4 percent after declining 0.3 percent in the previous quarter. The main impact came from higher petrol prices, which were up 8.8 percent in the June quarter. Without petrol, the CPI was flat for the quarter. On the year, the CPI increased 0.3 percent following a 0.1 percent increase in the March quarter.

The average price of a litre of 91 octane petrol in the June 2015 quarter was NZ$1.95, compared with NZ$1.79 in the March quarter. By the end of the June quarter, petrol pump prices were 4.1 percent above the average price for that quarter. Prices for the housing and household utilities group rose 0.7 percent for the latest quarter. Prices for newly built houses excluding land were up 1.5 percent nationally (2.8 percent in Auckland, and 0.7 percent in Canterbury). Housing rental prices rose 0.6 percent, with Auckland prices up 0.8 percent and Canterbury up 0.7 percent.

These price rises were partly offset by lower prices for domestic airfares (down 13 percent) following price rises in the previous two quarters. Domestic airfares were down 3.0 percent from a year earlier. Telecommunication services also fell for the June quarter (down 1.9 percent).

The prices of tradable goods and services (which face foreign competition) decreased 2.0 percent in the year, with lower prices for petrol (down 7.4 percent) and for international airfares (down 6.3 percent). Non-tradable goods and services increased 2.0 percent, the smallest annual increase since the December 2001 quarter. The main contributor was cigarettes & tobacco prices (up 14 percent), influenced by the increase in excise duty in January 2015. Excluding cigarettes & tobacco, the CPI fell 0.1 percent in the year to the June 2015 quarter.

Housing and household utility prices were up 2.5 percent in the year, with higher prices for newly built houses excluding land (up 5.3 percent), housing rentals (up 2.3 percent) and local authority rates (up 3.9 percent). In the year to the June 2015 quarter, prices for newly built houses excluding land rose 7.6 percent in Auckland, and rose 4.0 percent in Canterbury. Housing rentals rose 2.9 percent in Auckland, and 3.5 percent in Canterbury.

The consumer price index (CPI) measures the changing price of a fixed basket of goods and services purchased by New Zealand households. The selection and relative importance of the goods and services in the CPI basket represents the overall expenditure pattern of New Zealand households.

The aim of the CPI is to measure price changes of the same sample of products at each outlet over time. When there is a change in the size or quality of any of the goods or services in the basket, an adjustment is made to ensure that the price change shown in the CPI is not affected by the change in size or quality.

The CPI represents $88.9 billion spent on goods and services by New Zealand households, at June 2011 quarter prices. This is based on information from the 2009/10 Household Economic Survey and other sources. The CPI has an index reference period of the June 2006 quarter equal to 1000.

A price index measures the change in price between time periods for a given set of goods and services. It summarizes a set of prices for a variety of goods and services collected from a number of outlets. The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments. Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion. By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.

The CPI is used to help set monetary policy and for monitoring economic performance. It is used by the government to adjust New Zealand Superannuation and unemployment benefit payments once a year, to help ensure that these payments maintain their purchasing power. Employers and employees use the CPI in wage negotiations.