New Zealand: Inflation seen losing momentum in the next months – UOB

Economist Lee Sue Ann at UOB Group, reviewed the recent CPI figures in New Zealand and assessed the prospects for the rest of the year.

Key Quotes

“Consumer prices in New Zealand were up 0.8% q/q in the first quarter of 2020, higher than the 0.5% q/q print in the three months prior, and way above expectations for a print of 0.4% q/q. Annual inflation was at 2.5% y/y compared to 1.9% y/y in the fourth quarter of 2019, beating estimates for an annual rise of 2.1% y/y. This was also the highest reading since the September 2011 quarter, where it was 4.6%.”

“As it is, the latest inflation data does not fully capture COVID-19-related price movements as most of the data was collected prior to the lockdown that kicked off on 25 March.”

“Household incomes will be lower, and confidence dented. Businesses will be cautious for some time. Demand for goods and services, both domestically and abroad, will remain stagnant for a considerable period. As such, we could see the annual rate of inflation tumbling quickly to the bottom of the RBNZ’s targeted 1% to 3% range.”