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ANZ NZ Monthly Inflation Gauge January 2019

Fuseworks Media
Fuseworks Media

The ANZ Monthly Inflation Gauge increased 1.1% m/m in January. But the large monthly rise masks underlying details that are far less dramatic. The overall picture remains one of a slow grind higher in non-tradable inflation.

ANZ Senior Economist Liz Kendall said, "On the face of it, the 1.1% m/m lift in January looks like a decent nudge higher to start the year - it is the largest monthly rise since late 2015. However, the details are less striking. Temporary factors contributed around two thirds of the monthly rise.

"Overall, prices are rising in a gradual yet unspectacular fashion on the back of previous strength in the economy. We expect non-tradable inflation will nudge higher in the short term, but then dissipate. Broad-based inflationary pressure is still largely missing, outside of housing. One-offs, bounce-backs and offsetting movements in various sectors remain the story for now."

Additional detail:

- The main contributions came from annual tobacco and cigarette price rises (9.1% m/m, 3% q/q) and a bounce-back in domestic airfares (+22% m/m, -6% q/q) after an astonishingly large drop in December (-18% m/m).

- Overall, 12 of the 36 sub-components rose in January, including small contributions from medical services, rents, hairdressers and electricity, among others.

- The only components that fell were purchase of housing, sea transport and vehicle and contents insurance, which together provided only a small drag on the Gauge (0.02%pts).

- Looking through monthly volatility, implied quarterly growth from the Gauge is sitting comfortably in a 0.6-0.8% range. Annual growth ticked down from 2.3% to 2.2% (the lowest annual rate since mid-2017). Notwithstanding the miss in June 2018 (the largest miss since 2010), the Gauge has given an accurate read on non-tradable inflation for the last two CPI prints.

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