Housing, transport drive increase in CPI

WELLINGTON: Higher prices for transport and housing drove the consumer price index up by 0.8% in the March quarter, Stats NZ said.

The annual increase was 1.5%. The quarterly gain was in line with market expectations. It compared with a 0.5% increase in the December quarter.

The Reserve Bank had forecast a 1% quarterly rise.

The bank targets annual inflation to be within a 1% to 3% range, with a 2% midpoint.

Stats NZ said transport prices rose 3.9%, the biggest quarterly rise in more than a decade.

Petrol prices rose 7.2%, the biggest quarterly rise since June 2015.

Despite this, petrol prices are 3.8% lower than they were a year ago, the department said.

‘‘Global oil prices plunged in early 2020 as the Covid19 pandemic took hold,’’ prices senior manager Aaron Beck said in a statement.

‘‘Prices have risen since then.’’ The weighted average price of a litre of 91 octane was $2 in the March 2021 quarter, up from $1.87 in the December 2020 quarter and down from $2.09 in the March 2020 quarter.

By the end of the quarter, petrol prices were about 3.3% higher than the average over the quarter.

Rent prices rose 1%, the biggest quarterly increase in a year.

Annual rent prices increased 2.7%.

The price of building a new home increased 3.5% in the year to March 2021, the biggest annual increase since June 2019.

However, this is less than half of what it was when it peaked at almost 9% in 2004.

Annual inflation for the year to March 2021 was 1.5%, slightly higher than the 1.4% increase in the year to December 2020.

Annual inflation, with petrol excluded, was 1.7%, down from 2.1% in the year to December.

If food, household energy, and vehicle fuels were removed, annual inflation was 2%, down slightly from 2.1% in the year to December, the department said.

The New Zealand dollar was unchanged following the data, trading at US71.72c.

ASB senior economist Mark Smith said the inflation pulse was likely to quicken in the months ahead.

‘‘We expect annual headline inflation to move above 2% for much of the rest of this year and next as a perfect storm of stretched capacity, supply bottlenecks, and higher costs flow through in consumer prices.’’

This would take the annual rate above the Reserve Bank’s target, but it is not expected to change the central bank’s view on interest rates or other easy policy measures put in place to support the economy during the pandemic.

‘‘We expect the RBNZ to remain patient and defer from raising the OCR (official cash rate) until it is confident the expansion is secure, the economy is close to full employment and mediumterm inflation drivers are pointing well above 2%.

‘‘This still some way away and we have pencilled in August 2022, with risks of a later start to OCR hikes,’’ Mr Smith said. — The New Zealand Herald/RNZ