Inflation expected to stay flat

  • 20/01/2018

One of the first big economic releases of the year is due next week and economists don't think it will trouble the Government.

The annual Consumer Price Index (CPI) is expected to hold steady at 1.9 percent in the December quarter report due Thursday, according to ANZ economists.

The headline inflation rate is expected to rise 0.4 percent in the December quarter compared to the same quarter a year earlier.

The figures will likely be modestly above the Reserve Bank's November monetary policy statement forecast of 0.3 percent in the quarter, for an annual figure of 1.8 percent.

There is expected to still be evidence of inflation in the housing sector, but elsewhere the trends in the usually volatile components in the economy are offsetting each other.

"Outside of housing, evidence of a lift in domestic inflation pressures will be tentative at best," ANZ economists said in a preview.

The report will also include changes to weightings of categories.

Food prices have a higher weight and monthly data is pointing to a 1.6 percent quarterly fall, while petrol prices have a lower weight and prices have risen an estimated 6.2 percent in the quarter from the same quarter a year ago.

Domestic and international airfares are estimated to make a slight positive contribution, reflecting largely seasonal forces.

Household energy is expected to rise 0.8 percent in the quarter from the same quarter a year ago.

Rising rents in places like Wellington have been in the news, but in this inflation report only a 0.5 percent quarterly rise is expected.