Ballooning fuel prices push inflation higher
SOARING fuel prices in the quarter to September underpinned a larger rise in inflation than anyone expected.
Petrol prices rose 8.8% in Auckland for the quarter, with 3% to 5% rises across the rest of the country.
The inflationmeasuring consumers price index rose 0.9% for the three months ended September, while annual inflation rose to 1.9%, Statistics New Zealand data showed yesterday.
The Reserve Bank had been expecting a quarterly rise of 0.4% and an annual increase of 1.4%, while most economists last week picked a 0.7% quarterly rise and 1.7% annual.
The Reserve Bank’s inflation target is the midpoint of 1%3% inflation.
The New Zealand dollar rose almost half a US cent, trading at US65.90c following the data release.
ASB chief economist Nick Tuffley said the result was higher than ASB’s forecast and that of market consensus and also the Reserve Bank.
‘‘Much of the surprise was on the tradeable side of inflation, reflecting higher transport costs,’’ he said.
With the core measures of inflation ‘‘relatively subdued’’, Mr Tuffley expected the Reserve Bank to ‘‘remain patient’’ even if headline inflation rose to 2% in the near term.
‘‘We continue to expect the Reserve Bank to leave the [interestdriving] official cash rate (OCR) on hold until early 2020,’’ he said in a statement.
Westpac senior economist Michael Gordon said as expected, fuel made the single biggest contribution, with petrol prices up 5.5% on average over the quarter.
‘‘Aside from fuel prices, there were modest gains in prices of importheavy goods, reflecting the fall in the New Zealand dollar over the last year,’’ he said.
Dwellingrelated costs contributed much of the rise in nontradeable prices, he said.
Rents were relatively subdued with a 0.4% increase, but newhome construction rose by 1.3%, home insurance was up 4.4%, and local body rates rose by 5.1%, the latter the secondlargest increase during the past decade.
Infometrics economist Mieke Welvaert said the 5.5% rise in fuel costs was ‘‘noone’s sur prise’’ for the September, as pump prices in the final week hit $2.41 per litre and close to a record $2.50 elsewhere.
That increase drove the price of an average household’s basket of goods up by 1.9%, compared with September last year, she said.
She noted that if petrol prices were stripped out, inflation would have held at 1.1% since March, not in line with the growth expected.
‘‘Key concerns about the lack of underlying price inflation is that firms’ margins are continually being squeezed,’’ she said
Statistics prices senior mana ger Paul Pascoe said petrol prices rose 19% in the year to September, the highest annual increase since June 2011.
Multiple factors contributed to the petrol price increase for the quarter, he said.
The exchange rate fell during the quarter, while crude oil prices rose.
In addition, a regional fuel tax of 10c per litre, plus GST, was introduced in Auckland in July.
‘‘While petrol only makes up about 4% of the CPI, it can have a large impact on overall inflation,’’ Mr Pascoe said.