NZ: Consumer Price Index


Thu Oct 15 16:45:00 CDT 2015

Consensus Actual Previous
Q/Q percent change 0.2% 0.3% 0.4%
Y/Y percent change 0.3% 0.4% 0.3%

Highlights
In the September quarter, the consumers price index was up 0.3 percent. Higher housing related prices and seasonally higher vegetable and package holiday prices were partly countered by lower vehicle relicensing fees. After adjusting for seasonal effects, the CPI was up 0.1 percent. Housing related prices increased 1.2 percent. It was mostly influenced by higher prices for local authority rates, new houses excluding land and housing rentals. Vegetable prices were up 14 percent in the September 2015 quarter and package holiday prices were up 7.5 percent. After adjusting for seasonal effects, vegetable prices fell 1.7 percent while package holidays rose 3.0 percent.

Prices for tradable goods and services rose 0.7 percent, with the weaker New Zealand dollar influencing prices for overseas package holidays and petrol. Non-tradable goods and services showed no overall change, as housing-related price rises were offset by lower vehicle relicensing fees and increased subsidies for GP visits for children.

The CPI increased 0.4 percent in the year to the September 2015 quarter following a 0.4 percent increase in the year to the June 2015 quarter. Housing and household utility prices were up 2.7 percent with higher prices for newly built houses excluding land (up 5.5 percent), housing rentals (up 2.3 percent) and local authority rates (up 5.9 percent).

Definition
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.


Description
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.