NZ: Consumer Price Index


Sun Jul 17 17:45:00 CDT 2016

Consensus Actual Previous
Q/Q percent change 0.5% 0.4% 0.2%
Y/Y percent change 0.4% 0.4%

Highlights
The June quarter consumer price index rose 0.4 percent following a 0.2 percent increase in the March 2016 quarter. On the year, the CPI was up 0.4 percent for a second consecutive quarter. Higher petrol and housing-related prices were offset by lower prices for meat and domestic air fares.

Petrol prices showed the largest upward contribution, up 5.3 percent in the June 2016 quarter. This follows declines of 7.7 percent in the March 2016 quarter and 7.0 percent in the December 2015 quarter. Excluding petrol, the CPI rose 0.2 percent in the June 2016 quarter.

Housing & household utilities prices rose 1.0 percent in the June 2016 quarter. This increase was influenced by higher prices for newly built houses, excluding land (up 2.1 percent), electricity (up 1.8 percent) and rentals for housing (up 0.6 percent). Meat prices (down 2.7 percent) made the largest downward contribution for the latest quarter, followed by lower prices for domestic air fares (down 9.9 percent). Domestic air fares have fallen 14 percent since the December 2015 quarter.

On the year, housing-related prices continued to be the main upward contributor, up 3.3 percent in the year. This increase was influenced by higher prices for newly built houses, excluding land (up 5.6 percent) and rentals for housing (up 2.3 percent). Transport prices made the largest downward contribution, down 5.3 percent in the year as prices for petrol and domestic air fares fell. Excluding petrol, the CPI showed a 0.8 percent increase in the year to the June 2016 quarter.

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.