NZ CPI Preview: Forecasts from four major banks, RBNZ to continue hiking as inflation pressures remain high

Statistics New Zealand will release Q3 Consumer Price Index (CPI) inflation data on Monday, October 17 at 21:45 GMT and as we get closer to the release time, here are forecasts from economists and researchers of four major banks regarding the upcoming growth data.

Economists expect the CPI to have slowed from 7.3% year-on-year to 6.6%. Meanwhile, the quarter-on-quarter pace may have moderated to 1.6% from 1.7%. 

ANZ

“We expect annual CPI inflation eased to 6.6% in Q3, down from 7.3% in Q2 and a touch stronger than the RBNZ’s August MPS forecast of 6.4%. The bulk of the decline in headline inflation is expected to come from a sharp drop in petrol prices. While that’s absolutely welcome, the fact that there’s unlikely to be any sign of a broad-based easing in underlying inflation pressures means monetary policymakers can take only limited comfort from the headline fall. We’re forecasting that annual non-tradables (ie domestic) inflation stayed high at 6.3%, and that measures of core inflation remained too strong (even if they could ease a touch from recent highs). The inflation report is unlikely to contain the evidence needed to convince the RBNZ that underlying inflation has turned the corner. Unless there’s a step change in the outlook, we see the RBNZ on track to lift the OCR to a peak of 4.75% in May 2023.”

Westpac

“We expect the upcoming CPI will show that New Zealand consumer prices rose by 1.8% in the September quarter. That would see annual inflation slipping to 6.9%, down from 7.3% last quarter. Nevertheless, that would still leave us with a picture of consumer prices that are continuing to charge higher, with annual inflation running close to multi-decade highs. The September quarter saw particularly large increases in food prices and housing-related costs. Those increases were only partially offset by the easing in fuel prices. Measures of core inflation are expected to remain elevated, consistent with the ongoing pressure on wages and other operating costs, as well as the resilience in demand. Our forecast is higher than RBNZ’s last published forecast. A result in line with our forecast would reinforce the recent rise in market pricing for the OCR.”

TDS

“Food prices are up a whopping 4.1% QoQ in Q3 and will be a key inflation driver. Further, we think the buildup in wage cost will filter through to CPI and expect a more hawkish CPI print (1.7%) compared to consensus and the RBNZ (+1.4% QoQ). Inflation is still far too high and another red-hot CPI print reinforces our call for another 50 bps in Nov and a higher terminal rate of 4.5%.”

Citibank

“NZ Q3 CPI Citi QoQ forecast; 2.0%, Previous; 1.7%; Citi YoY forecast; 7.0%, Previous; 7.3%. NZ inflation is expected to accelerate further on a quarterly basis in Q3 on the back of rising food prices. Elsewhere, housing costs are likely to moderately decline from its recent highs of around 4.5% to 2.8% in Q3 though price increases still remain higher than average and continue to add to inflationary pressures in the near-term.”