From the FXWW Chatroom – New Zealand’s Q2 CPI printed in line with the RBNZ’s expectations as outlined
in the May MPS and just a tad below our and the market consensus expectation,
which was for a 0.5%qoq outturn. Non-tradables inflation was in line with our
pick, rising 0.4%qoq to be 2.5% higher in year-ended terms, while tradables
inflation was softer than we had expected, lifting just 0.3%qoq to be up 0.1%
higher over the year. After a 0.7%qoq outturn in Q1, the 10% ‘trimmed mean’
rose 0.4%qoq to be 1.8% higher over the year, while the weighted median is
at 0.6%qoq / 2.3% year-ended. Across the CPI groups, there was a little more
inflation in the ‘alcohol and tobacco’ group than we had anticipated, though this
was offset by a softer rise in the ‘transport’ category.
For the RBNZ? Nothing to see here, yet…
Aside from headline inflation printing in line with the RBNZ’s expectations in Q2,
there is nothing in the details of the print that would seem likely to drive a change
in the Bank’s assessment of underlying inflationary pressures. Crucially, there is
yet little sign of a breakout in non-tradables inflation. As Figure 2 shows, yearended
non-tradables inflation has been stable at around 2½% since the second
half of 2016, and the tick-up in year-ended inflation this quarter was not enough
to see a break-out of this recent range. Just how long this can persist is another
question entirely. As Figure 2 shows, there are signs that wage inflation picked
up sharply in Q1-2018. The next key data point for NZ will be the labour force data
for Q2 due on 1 August. We will be watching the wages component especially
closely.
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