NZ: Prices in the monthly inflation gauge lifted 0.4% m/m in September - ANZ

Phil Borkin, Senior Economist at ANZ, notes that prices in the monthly inflation gauge of New Zealand lifted 0.4% m/m in September, which is the strongest increase for a September month since 2011.

Key Quotes

“The annual movement lifted to 2.8% from 2.6%. The Underlying Ex-housing Gauge once again rose 0.2% m/m.”

“Quarterly growth in the headline gauge rose to 0.8%, which is higher than normal for a September quarter. It therefore points to the prospect of a solid non-tradable inflation print when the official Q3 CPI figures are released on 17 November.”

“Electricity made the largest contribution this month. Accommodation services, purchase of housing costs, health insurance, telecommunication services and rents rounded out the top six places.”

“Of the 36 groups in the Gauge, 10 rose, three fell and 23 remained unchanged.”

“The headline Gauge lifted 0.4% m/m in seasonally adjusted terms, while the Underlying Ex-housing Gauge was up 0.1% m/m seasonally adjusted. So on the face of it, it is still the case that there is not much to see once housing is stripped out.”

“But while the housing group was again the main positive contributor, we do note that other groups within the gauge are showing tentative signs of life. In particular, despite a subdued month, quarterly growth lifted from 0.3% to 0.5% for the Underlying Ex-housing Gauge – the highest since October 2013. Prices outside of housing have tended to undershoot headline growth, but we appear to be seeing persistent growth in the Underlying Exhousing Gauge emerging. That said, it is still a mixed picture – at the same time as some are rising, we still have a lot of non-housing groups seeing either zero or negative price movement.”

“It is a story that needs to be watched. However, it’s more a case of making us more alert at the sub-component level, as opposed to drawing strong conclusions about the path of aggregate inflation.”