Deflation continues due to lower global prices

October 2015

  Oct 15 Sep 15 Aug 15 Jul 15

Headline * -1.3 -1.9 -1.0 1.6
Domestic ^ 1.6 1.3 2.6 3.9
Imported ^ -2.9 -3.2 -3.6 -2.3
Underlying * 5.9 5.3 7.9 9.9

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

Deflation continues due to lower global prices

CPI increased slightly by 0.3% over the month caused by higher domestic prices particularly domestic Food prices. Higher prices for food items such as pineapples, taro, sweet potatoes, cassava, and fish contributed to the monthly rise. Prices within the Household Operations component increased. In contrast, Imported prices fell by 0.2% mainly due to lower Transportation prices. Overall Imported Food prices rose slightly despite decreases in Fruit & Vegetables, and Cereals and Cereal Products. The Tongan Pa’anga depreciated against the New Zealand Dollar which could have contributed to the higher Imported Food prices.

Over the year, the headline inflation decreased by 1.3% as a result of lower imported prices. Imported prices fell by 4.9% whilst domestic prices increased by 4.0%. Prices for all Imported Food items decreased except for Other food. In addition, prices within the Household Operation (electricity prices) and Transportation components declined due to the falling global oil prices over the year. Other imported items such as Tobacco & Alcohol, and Clothing & Footwear prices increased over the year but were insufficient to offset the declines for food and energy prices. Domestic prices increased due to rising food prices for items such as Fruit & Vegetables, Meats, Fish & Poultry, and Dairy products. 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 5.9% indicating the significant influence global prices has on inflation.

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

Download the Inflation Rate report of October for more information and figures.

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