Global prices continue to drive headline deflation

November 2015

  Nov 15 Oct 15 Sep 15 Aug 15

Headline * -1.9 -1.3 -1.9 -1.0
Domestic ^ 1.0 4.0 1.3 2.6
Imported ^ -2.8 -4.9 -3.2 -3.6
Underlying * 4.7 5.9 5.3 7.9

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

Global prices continue to drive headline deflation

Monthly CPI decreased slightly by 0.5% as a result of both declines in imported and domestic prices. More specifically, lower prices for domestic food items such as pineapples, ripe bananas, early yams, tomatoes and carrots contributed to a 1.0% decline in domestic prices. These food items are around their harvesting season and ripe bananas are usually in plentiful supply during summer season. Transportation prices for petrol caused the imported component to slightly decrease by 0.1% over the month as World oil prices fell by 7.6% from USD$48.56 in October 2015 to USD$44.86 in November 2015. The Tongan Pa’anga remained stable against the New Zealand Dollar but depreciated against the U.S. Dollar which partially offset the effect of falling global oil prices.

Annual inflation decreased by 1.9% due to falling imported prices. Imported inflation declined by 4.7% as a result of decreases for Meats, fish & poultry, and Fruit & vegetables. This include items such as mutton flaps, chicken pieces, oranges, potatoes and onions. However, prices for ‘Other food’ particularly flour and sugar increased over the year slightly offsetting the annual increase in Food prices. In addition, prices within the Household Operation and Transportation components decreased mainly due to the declining global oil prices. At the end of November 2015, global oil prices stood at USD$44.86 a barrel down from USD$72.82 in November 2014. Other imported items such as Tobacco particularly Winfield blue, and Clothing & Footwear prices increased over the year but were insufficient to offset the declines for food and energy prices. Contrastingly, domestic prices rose by 2.4% and were driven by higher local food prices mainly for Fruit & vegetables such as pineapple, dry and green coconuts and lu which are mainly due to adverse weather conditions over the year. The annual core inflation rate (excluding energy and imported food) increased by 4.7% indicating the significant influence global prices has on inflation. However, it is still below the NRBT’s reference range of 6-8%.

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

Download the complete Inflation Rate report for November 2015 for more information and figures.






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