Headline CPI rose 0.4% in Q2 - ANZ

Stubbornly weak inflation rates suggest the official cash rate will remain locked at record low 1.75 for the foreseeable future

New Zealand's consumer price index was expected to have risen slightly in the second quarter in official figures due out on Tuesday, but is unlikely to change the central bank's stance given weak underlying inflationary pressures. It traded at 57.81 euro cents from 57.78 cents and rose to 4.5211 yuan from 4.5124 yuan. For the record, we anticipate 0.6% q/q, for annual CPI inflation of 1.7% (and on course for 2.2% by end-2018).

The kiwi traded at 67.58 U.S. cents as at 8am in Wellington from 67.63 cents in NY on Friday and from 67.75 cents in Wellington at the end of last week.

The biggest driver behind the quarterly lift was housing-related prices, up 0.9 per cent in the quarter and 3.1 per cent annually. Broadly as expected, the food group rose 0.8% q/q and petrol prices rose 3.2% q/q.

"New Zealanders are paying more to keep their homes running, Statistics NZ Prices Senior Manager Paul Pascoe says".

Rates, property maintenance services, and home insurance are all higher than they were this time past year, Pascoe said.

Dwelling insurance prices have jumped 18% when compared to the year to June 2018. Used auto prices fell 3.3 percent, while subscriber TV and audio-visual equipment fell 7.2 percent and 15 percent, respectively.

Excluding the impact of petrol prices, StatsNZ said CPI increased by 1.1% over the year.

In the quarter, construction prices in Auckland and Wellington rose 0.6 percent and 0.7 percent, respectively.

"It was cheaper to buy a used auto this quarter as dealerships looked to move some stock, but that was offset by higher running costs", Mr Pascoe said.

Food prices, meanwhile, lifted 0.8 per cent in the quarter, with fruit and vegetable prices up 3.1 per cent. Food prices rose 0.7 per cent on the year.

Home entertainment prices fell in the June 2018 quarter, with better value audio-visual equipment and lower prices for subscriber TV.

The tradables CPI, which includes goods and services that compete with global rivals, rose 0.3 per cent in the quarter and was up 0.1 per cent on the year.

New Zealand CPI rose by 0.4% in the June quarter, below the 0.5% increase expected by financial markets. Central bank chief Karnit Flug has said rates likely will not rise until inflation moves back to within its target range and is entrenched there.

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