CPI stats out - annual inflation now 3pc

Falling fuel prices have pushed the latest CPI increase down to just 0.3pc.

The Consumers Price Index (CPI) increased 0.3 per cent in the March 2009 quarter, Statistics New Zealand said today. This means that annual inflation is now 3 per cent.

It was 5.1 per cent last September, reflecting high oil prices, but is now expected to dip below 1 per cent by next September.

These latest inflation numbers show that higher prices for food and cigarettes were largely offset by lower transport prices.

The food group rose 1.2 per cent in the quarter, driven by a 1.4 per cent hike in grocery food prices. If food prices had remained constant from the December 2008 quarter, the CPI would have also remained constant.

Alcoholic beverages and tobacco were up 1.8 per cent. The excise tax on cigarettes and tobacco rose a little over 5 per cent on January 1.

The housing and household utilities group rose 0.3 per cent in the March 2009 quarter. This is the smallest increase since the June 2001 quarter.

Prices for the purchase of new housing recorded no overall change in the latest quarter.

Cheaper international air travel, diesel and petrol pushed the "transport group" down 1.5 per cent, which was the most significant downward push on the CPI.

The average pick among market economists was for a 0.3 per cent rise in the quarter, which would pull the annual rate down to 3 per cent from 3.4 per cent in December and a peak of 5.1 per cent in September 2008.

Demand is generally weak and the amount of slack in the economy is rising. "Inflationary pressures dissipate under such conditions," Westpac economist Doug Steel said earlier this week.

The Reserve Bank and private sector economists expect the annual inflation rate to drop briefly below 1 per cent by the September quarter, as last year's spike in oil prices drops out of the numbers.

- HERALD ONLINE