First quarter inflation steady

By Phil Boeyen, ShareChat Business News Editor

Tuesday 16th April 2002

New Zealand's annual inflation rate for the year ended March stands at 2.6%, slightly below market expectations of 2.8% and the Reserve Bank's projection of 3%.

Statistics New Zealand released its latest Consumers Price Index (CPI) data on Tuesday showing the index had risen by 0.6% in the March 2002 quarter following similar rises of 0.6% in both the December and September 2001 quarters.

"The increase of 0.6% in the March 2002 quarter reflects higher prices for food and housing, partly offset by lower transportation prices," Statistics NZ reports.

Food prices in the first three months of this year rose 1.2%, driven by a 0.8% rise in grocery food price and a 3.2% increase in fruit and vegetable prices, largely due to a weather-affected increase of 8.1% in January.

Fruit and vegetable prices in February fell by 1.7% and in March by 2.4%.

The latest figures show the housing group rose by 1% in the March quarter, driven by an increase of 1.4 % for the purchase and construction of new dwellings.

Tobacco and alcohol also made an upward contribution to the overall CPI movement in the March 2002 quarter, increasing by 1.1%.

Statistics NZ says the most significant downward contribution to the CPI in the March 2002 quarter came from a fall of 0.6% in transportation prices, mainly due to lower prices for international air travel. However prices for used cars rose 2.3% and domestic air travel prices also increased by the same amount.

Although the latest inflation figure is moving towards the top of the Reserve Bank's 0-3% inflation target, it remains well clear of the bank's own CPI projection of 3% for the March year.

This could mean the bank will stay its hand on increasing interest rates tomorrow when it is due to deliver an official cash rate review and instead wait until May when it has a clearer indication of what fiscal steering is needed.

The Reserve Bank last increased interest rates on March 20 when it lifted the OCR by 25 basis points from 4.75% to 5%. Other countries, including Australia, remain wary of stronger economic growth but have yet to begin a tightening cycle.

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