NZ: Prices in the monthly inflation gauge lifted 0.2% m/m in May - ANZ

Prices in the New Zealand’s monthly inflation gauge lifted 0.2% m/m in May and were up 2.3% y/y while the Underlying Ex-housing Gauge also lifted 0.2% in the month and is now up 1.0% y/y, notes Cameron Bagrie, Chief Economist at ANZ.

Key Quotes

“Prices in the Gauge lifted 0.2% m/m in May. That is a slightly stronger increase than we typically see at this time of year.”

“Some sizeable lifts came through in the miscellaneous services category. That provided some upward impetus to the Underlying Ex-housing Gauge too, which also rose 0.2% m/m. This saw annual inflation on this measure lift to 1.0% y/y – the strongest since November 2014. However, beyond the miscellaneous services category, prices movements were benign – a case of ‘nothing to see here’.”

“In seasonally adjusted terms, the overall gauge lifted 0.4% m/m, which is the largest jump in close to a year.”

“Prices in the housing group were flat. The purchase of housing was up again, but was offset by a small fall in rents. We use official data from MBIE and it’s not showing any real sign of rents rising to match anecdotes that houses are increasingly hard to find and rents are skyrocketing in some regions.”

“In the month other positive contributions came from accommodation services and dwelling insurance. Domestic airfares made the largest negative contribution.”

“Of the 36 groups in the Gauge, eight rose, two fell and 26 remained unchanged.”

“We are mindful that nudges can be the start of building momentum. However, we’ve been here before – we saw similar moves this time last year, and nothing transpired. Until we see some consistent pushes across multiple groups, our assessment of the inflationary picture will remain benign.”