| Consensus | Consensus Range | Actual | Previous | |
| Quarter over Quarter | 0.8% | 0.7% to 0.9% | 0.7% | 1.5% |
| Year over Year | 3.8% | 3.7% to 3.9% | 3.7% | 4.1% |
Highlights
New Zealand consumer prices rose 3.7 percent on the year in the three months to September, moderating from the 4.1 percent increase recorded in the three months to June. This leaves the headline inflation rate well above the top of the Reserve Bank of New Zealand's target range of 1.0 percent to 3.0 percent. The index advanced 0.7 percent on the quarter after increasing 1.5 previously.
Slower headline inflation in the three months to September was largely driven a smaller increase in fuel prices. Officials noted that inflation would have been 3.2 percent if petrol prices had not changed. This may reassure officials at the the Reserve Bank of New Zealand that broader price pressures are moderating after they raised policy rates in each of their previous two policy meetings.
Market Consensus Before Announcement
Annual inflation expected to recede to 3.8 percent in Q3 from 4.1 percent in Q2 as fuel costs are seen lower, offset by higher property taxes, food and building costs.
Definition
The consumer price index (CPI) measures the changing prices of a fixed basket of goods and services. 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.
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.