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Inflation stuck in neutral, up 0.1 percent in December 2018 quarter

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The consumers price index (CPI) was up 0.1 percent in the December 2018 quarter despite lower petrol prices, and cheaper vegetables and cigarettes, Stats NZ said.

The annual inflation rate was 1.9 percent for the December 2018 year, unchanged from the September 2018 year. Annual inflation has ranged between 1.1 percent and 2.2 percent since December 2016.

The average price of petrol for the December 2018 quarter fell 0.6 percent from September 2018’s average. This was the first quarterly fall since September 2017.

The fall in petrol prices follows a 5.5 percent increase in the September 2018 quarter.

“The price of petrol fell continually throughout the quarter, down from highs in October,” prices senior manager Paul Pascoe said. “By the last week of December, the pump price was 8.3 percent below the December quarter average.”

Regionally, the quarterly fall in petrol prices was driven by the South Island and Wellington, down 3.1 and 2.6 percent, respectively. In comparison, Auckland and the rest of the North Island experienced petrol price rises of 0.4 and 0.6 percent, respectively. Over the year, Auckland petrol prices increased 17 percent, overtaking those in the South Island and Wellington regions. Contributing to this was the 10 cents per litre (plus GST) regional fuel tax introduced in Auckland on 1 July 2018.

Falls in the price of crude oil and a rising exchange rate over the quarter contributed to the overall decrease in petrol prices. This price fall was seen despite the additional 3.5 cents (plus GST) per litre petrol excise tax introduced on 30 September 2018.

Seasonal prices determine 0.1 percent quarterly rise

The 0.1 percent quarterly rise in CPI inflation was led by typical seasonal rises in international airfares, which were largely offset by seasonal falls in prices for vegetables.

Prices for games, toys, and hobbies also contributed to the rise, driven by the release of popular, new, and more expensive electronic video games during the quarter.

“Gamers paid more for electronic downloads of popular international video games,” Mr Pascoe said.

Cigarette and tobacco prices fell for the first time since December 2009 (down 1.3 percent). In the past nine years, the average price of a pack of cigarettes rose more than 160 percent, to $34.57 for a pack of 25. The slight fall in cigarette prices in the December 2018 quarter came just ahead of a 10 percent increase in excise tax on 1 January 2019.

Telecommunications services rose 1.0 percent in the December 2018 quarter, running against a previous trend of falling prices.

“Quality adjustments generally cause prices for telecommunications services to fall, as consumers gain from better speeds and capacity,” Mr Pascoe said. “However, this quarter price increases for ADSL and VDSL network plans contributed to the rise.”

New rent method

Stats NZ is moving to using tenancy bond data for calculating rent in the CPI. The new series will be published on a monthly basis from the January 2019 reference month (published in February 2019) onwards. Back series and a technical paper will also be published with the first release in February 2019.

There are many benefits to moving to a new methodology and data source, including reducing respondent burden, saving money, full coverage, and the ability to produce more frequent releases. The new method will be introduced into the CPI in the June quarter 2019 release (to be published in July 2019).

Source: Stats NZ

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