Higher-than-expected third-quarter inflation is unlikely to take rate cuts off the table, as it was largely driven by higher petrol prices.

Statistics New Zealand figures showed the consumers price index rose 0.9 percent in the three months ended September 30, as against Reserve Bank estimates of 0.4 percent and a median economists’ prediction of 0.7 percent. 

For the September year, inflation was 1.9 percent, compared with Reserve Bank forecasts of 1.4 percent. A poll of 14 economists surveyed by Bloomberg expected 1.7 percent. 

Petrol price hikes were the dominant factor. Petrol prices rose 5.5 percent in the September quarter and were up 19 percent on the year, the highest annual increase since June 2011.  

Statistics NZ says “multiple factors” contributed to the rise, including the weaker New Zealand dollar, a lift in crude oil prices and a regional fuel tax introduced in Auckland, where petrol prices increased 8.8 percent over the quarter.

If petrol is stripped out, the increase was 0.7 percent for the September quarter and 1.2 percent for the September year.

“While petrol only makes up about 4 percent of the CPI, it can have a large impact on overall inflation,” Statistics NZ prices senior manager Paul Pascoe says.

The New Zealand dollar jumped almost half a US cent.

The central bank is mandated with keeping annual inflation between 1 and 3 percent over the medium term, focusing on the mid-point. Stubbornly weak inflation has kept interest rates on hold at a record low 1.75 percent and in September governor Adrian Orr reiterated the next move could be down if the economy fails to fire.  

At the time he also noted the impact higher fuel prices would have on near-term inflation, but said the central bank would “look through this volatility as appropriate.” Orr still expects consumer price inflation to “gradually rise” to the 2 percent annual target.

Stats NZ says housing-related costs were a significant factor in the boost in annual inflation. Housing and household utilities lifted 3.1 percent on the year, local authority rates and payments were up 5.1 percent on the quarter, and annual construction prices were up 4.1 percent.

While local authority rates increase in the September quarter each year, “the rise this year is higher than the 4.2 percent average increase we have seen over the last five years,” Pascoe says.

Insurance premiums also rose, with dwelling insurance up 4.4 percent on the quarter and 16 percent on the year. Contents insurance was up 1.1. percent on the quarter and 4.3 percent on the year.

Rentals rose 0.4 percent in the quarter and were 2.3 percent higher for the year. Household energy prices, which includes electricity, gas and solid fuels, eased 0.1 percent on the quarter and were up 2.4 percent on the year.

Prices for the purchase of newly-built homes lifted 1.3 percent on the quarter and were up 4.1 percent on the year.

Food prices, meanwhile are pretty stable. They rose 0.6 percent in the quarter, but only 0.2 percent on the year.

The tradables CPI, which includes goods and services that compete with international rivals, rose 0.9 percent in the quarter and was up 0.8 percent on the year. Non-tradables inflation, which focuses on domestic goods and services, rose a quarterly 0.8 percent for a 2.6 percent annual increase.

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