CPI rises by 0.6 per cent in March quarter

Inflation, as measured by the Consumer Price Index (CPI), rose by 0.6 per cent in the three months ending March 2001 -- two basis points below private sector forecasts.

That figure took the annual inflation rate to 2.6 per cent -- a touch lower than forecast but still at the high side of the Reserve Bank's 0 per cent to 3 per cent target range. That compares with a 3.1 per cent rise in the year to March 2001.

The data, released by Statistics New Zealand (SNZ), should free the way for Reserve Bank governor Don Brash to raise interest rates again at tomorrow's review.

Most economists are picking Dr Brash will raise the cash rate by a further 25 basis points to 5.25 per cent in an attempt to harness inflation, with recent data indicating that the domestic economy is growing at a healthy clip.

The Food Price Index, also out today, is supportive of that move. The monthly index showed food prices rose by 0.4 per cent in March, driven by higher grocery food and poultry prices. Economists had on average expected no change. For the year to March, prices were up 5.5 per cent.

Today's rise in the CPI number reflected higher prices for food and housing, SNZ said.

That rise was partly offset by lower transportation costs.

Food prices rose by 1.2 per cent during the quarter, driven by an 0.8 per cent rise in grocery foods and a 3.2 per cent rise in fruit and vegetables. The increase in fruit and vegetable prices was mainly due to an 8.1 per cent increase in January -- an unseasonally wet month.

This is the third consecutive quarter in which food prices have made the most significant upward contribution to the overall CPI movement, the government agency said.

The housing group rose by 1 per cent in the March 2002 quarter, driven by an increase of 1.4 per cent for the purchase and construction of new dwellings.

Tobacco and alcohol also made an upward contribution to the overall CPI movement, increasing by 1.1 per cent. That was due partly to a 2.4 per cent increase in excise duty on cigarettes and tobacco on December 1 last year.

The most significant downward contribution to the index in the March quarter came from a 0.6 per cent fall in transportation prices. This movement was due largely to lower prices for international air travel, down 8.1 per cent, reflecting normal patterns for that time of the year. That was partly offset by rises in prices for used cars (up 2.3 per cent) and domestic air travel (up 2.3 per cent).

Of the nine groups in the CPI, seven recorded increases during the March quarter.

SNZ said today the CPI and FPI will be re-weighted after publication of the June 2002 quarter CPI and June 2002 month FPI.

The next CPI, for the June quarter, will be published on July 15.

- NZPA