The Consumer Price Index
With the distraction of another Gulf war and resulting fuel prices it’s easy to lose sight of the actual state of the NZ economy.
By Brian Coogan - Infinance
Yes, it costs more to fill up the car per litre however based on the number of litres the average person uses personally, the increase is still about a coffee every other day on the average monthly spend, not ideal but we’ve seen worse.
The real damage is being done where it really matters and that’s in commercial volumes in production and transport where the cost typically gets passed on to the end user culminating in shelf prices that affect you and me.
Inflation is one of the key drivers in economics and affects everything from demand to interest rates, yes interest rates, having decreased and on a stable path that are now at risk of being raised over the coming months to counter the effects of inflation, or are they?
Q4 25 saw the CPI at 3.1% and on a downward trajectory toward the 2% midpoint target with the Q1 26 figures being announced on 21st April, however now expected to reach 4.2% at the Q2 26 announcement in July.
We do however, have a secret weapon in the newly minted Reserve Bank Governor Anna Breman who’s long term approach denotes a steady hand on the OCR having just held it at 2.25% on 8th April citing the short term effects of fuel prices on inflation will abate in time and while some economists are now spruiking three OCR increases this year, the real business is done at the RBNZ where the focus is on stimulative economics and steady growth, continuing on from where we left off before everything went awry in The Gulf.
We also have things like the Fontera $5.4b payout creating a welcome tailwind to the economy right now helping to offset the cost headwinds albeit largely on the sale of the Mainland consumer business to French multi-national Lactalis adding a multiplier effect of 1% to GDP in itself over time, coupled with strong demand, firm prices and beneficial exchange rates for our commodities with the ag sector overall leading the charge this time adding resilience to the economy.
The real key in the short term is the Gulf and what happens there, right now it’s all a bit skittish and remains to be seen where it will go, watch this space for that one.
For more on the above go to www.infinance.co.nz/insights
Written by Brian Coogan, Licensed Financial Adviser and Director at Infinance - Taupo
‘All lasting business is built on friendship’ – Albert A Montapert