Imported prices continue to drive annual deflation

September 2015

  Sep 15
Aug 15
Jul 15
Jun 15

Headline * -1.9 -1.0 1.6 0.2
Domestic ^ 1.3 2.6 3.9 2.6
Imported ^ -3.2 -3.6 -2.3 -2.4
Underlying * 5.3 7.9 9.9 7.8

* Year-ended growth
^ Percentage point contribution to year-ended growth

Imported prices continue to drive annual deflation

Over the month, inflation decreased by 2.1% as a result of declines in both imported and domestic prices. Domestic inflation fell by 4.3% due to lower prices within the Food and Household Operation components. Specifically, prices of food items such as pawpaw, watermelon, Pele, and tomatoes decreased over the month. Suckling pigs, tuna fish, and other seafood further drove domestic food prices down. Imported inflation slightly decreased by 0.4% due to a fall in Transportation prices. This had offset minimal increases in Imported Food, Housing, and Tobacco & Alcohol prices. The Tongan Pa’anga depreciated against the New Zealand Dollar and the U.S. Dollar, which could have slightly offset the effect of falling global prices for oil and food.

Annual headline inflation declined by 1.9%, driven by imported prices which decreased by 5.2%. In particular, prices for almost all imported food items contributed largely to the decline. World oil prices dropped over the year which affected the Transportation and electricity prices (Household Operations). Other imported items such as Tobacco & Alcohol, and Clothing & Footwear prices increased over the year but insufficient to offset the declines for food and energy prices. Domestic inflation rose by 3.2% as a result of higher food prices. This coincides with lower agricultural output due to adverse weather conditions over the year. The annual core inflation rate (excluding energy and imported food) increased by 5.3% indicating the significant influence global prices has on inflation.

On the outlook, the NRBT continues to expect that headline inflation will remain low until the end of this calendar year. However, risks to this forecast would be developments in world oil prices and food prices for both domestic and imported.

Download a copy of the Inflation Rate Report for May for more details and graphs.

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