NZ: Prices in the Monthly Inflation Gauge lifted 0.8% m/m in January

Prices in the ANZ Monthly Inflation Gauge for NZ were lifted 0.8% m/m in January, notes Sharon Zollner, Chief Economist at ANZ.

Key Quotes

“At first blush this looks like a hint of inflationary momentum: the 0.8% m/m rise is the strongest in three years, quarterly growth is close to a three-year high (1.1%) and annual growth hasn’t been this high since mid-2014. However, removing one-offs (tobacco and cigarettes) and housing from the Gauge leaves a scattering of rising and falling prices that largely offset each other.”

“Tobacco and cigarettes made by far the strongest contribution this month, up 10.2% m/m and accounting for three quarters of the overall lift. Domestic air transport came in second with a seasonal 10% m/m rise, while housing rents squeezed higher (0.5% m/m). A seasonal fall in accommodation (down 0.7% m/m) and the first drop in purchase of housing since late 2016 were the main offsets. Of the 36 subcomponents in the Gauge, 14 rose, 4 fell and 18 remained unchanged.”

“The path of inflation from here is far from clear. Although one-offs played a big part, this month’s Gauge gives us reason to keep a close watch for whether momentum continues through the rest of Q1. It’ll be a tough grind with a wobbly economic growth outlook in the near term, but we do see a degree of upside risk to wages and thus firms’ costs.”