Key Facts

  • Statistics NZ’s monthly Selected Price Indexes (SPI) for November shows a decline in food prices by 0.2% compared to the previous month.
  • The annual rate of food price inflation dropped to 6.0% from 6.3% in October, from a peak of 12.5% in April.
  • A 0.2% monthly decrease was observed in the measurement of rents, with lower fuel and international travel costs but a hike in domestic air travel and accommodation costs.
  • BNZ’s economists project December quarter CPI of 0.6% month-on-month and 4.7% year-on-year. This is less than the Reserve Bank’s expectations of 0.8% and 5% respectively.
  • Non-tradable inflation continues to be above the Reserve Bank’s prediction of 5.7% y-o-y for Q4 [the December quarter].
  • Westpac NZ’s calculations imply December quarter CPI to be 0.3% from 0.6%, lifting prices up by 4.5% yearly.
  • ASB Senior Economist predicts that persistent core inflation trends will prevent Official Cash Rate (currently 5.50%) hikes.

Article Summary

The latest Selected Price Indexes (SPI) by Statistics NZ for November paints a softened overall inflation picture. However, non-tradable inflation, a significant consideration for the Reserve Bank, remains stubborn. The SPI data indicate a 0.2% decrease in food prices in November 2023 compared to October that year, with the annual food price inflation dropping to 6.0%, a decline from 6.3% in October and its peak of 12.5% in April.

Rent measurements saw a monthly 0.2% decrease alongside lower fuel and international travel expenses. However, the cost of domestic air travel and accommodation increased. BNZ economists now are leaning towards projecting a downward trend in the December quarter CPI, with estimates being 0.6% month-on-month and 4.7% year-on-year, coming under the Reserve Bank’s expectations of 0.8% and 5%, respectively.

The troublesome issue of non-tradable inflation appears to be exceeding the Reserve Bank’s prediction of a 5.7% y-o-y increase for Q4. Westpac NZ Senior Economist Satish Ranchhod notes that these SPI figures reinforce the downside risks to the Reserve Bank’s forecast for a 0.8% December quarter CPI rise, leading to a revision down to 0.3% from 0.6%, indicating a yearly price increase of 4.5%.

ASB Senior Economist Mark Smith warns of the persistence of core inflation trends, implying that the Reserve Bank may not be in a position to raise the Official Cash Rate (currently at 5.50%) further. Predictions state that the OCR rates may remain the same to secure circa 2% inflation. The December quarter CPI data will be released by Statistics NZ on January 24.

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