CPI Preview Q1 2017: One-hit wonder

We expect the CPI to print at 0.9% qoq in Q1, substantially stronger than the RBNZ’s 0.3% qoq forecast in February’s Monetary Policy Statement (MPS).  Q1’s lift in prices largely reflects a continuation of Q4’s key trends, exacerbated by a number of temporary price increases.  Tight capacity pressures in the construction and services (tourism) sectors, combined with a further lift in petrol prices, remain key drivers of inflation over Q1. In addition, a 10% tobacco tax increase and a lift in food prices will combine to push annual inflation above 2% for the first time in over 5 years.

Despite annual inflation returning to the RBNZ’s 2% target, we caution that part of this lift in inflation is temporary. Higher petrol, food (largely fruit and vegetables) and tobacco prices are transitory and, as a result, we expect inflation to dip again before grinding back up to the midpoint of the inflation target over the medium term. The RBNZ itself noted in March’s OCR statement that inflation is likely to be volatile over the near term. With broader inflation pressures still muted, we expect the RBNZ to leave OCR unchanged until late 2018.

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Nick Tuffley

ASB Chief Economist

Since starting out in 1997 as an economist, it's fair to say Nick has seen a few hair-raising moments over the years, including the Asian Financial Crisis and the Global Financial Crisis.

One of Nick's strengths is his ability to communicate complex ideas in a readily understandable and entertaining way.  He thrives on helping people understand the economic environment to help enrich the quality of their business or personal life. He’s proud to lead a team that has won two Forecast Accuracy Awards from Consensus Economics, and has a strong track record with their Official Cash Rate and dairy price forecasts. 

Nick grew up in Christchurch and graduated with a Master of Commerce degree from the University of Canterbury.  He learned his economic ropes at the Reserve Bank of New Zealand before a long stint as a Senior Economist at Westpac, and joined ASB as Chief Economist in 2007.

Jane Turner

Senior Economist

Originally hailing from sunny Nelson, Jane moved to Auckland to join the ASB team in 2008.  As Senior Economist, Jane's main focus is co-ordinating the team’s macro-economic forecasts.  In this key role, Jane was thrilled by the team’s twice consecutive win of the Consensus Economics Forecast Accuracy award.   

During her decade-long career in economic forecasting, Jane has gained a thorough knowledge of the New Zealand economy.  Her current focus is on New Zealand GDP growth, including both manufacturing and the construction sectors.  She has spent time forecasting most sectors of the economy, including inflation, trade, housing, labour and financial markets.

Prior to joining ASB, Jane honed her macro-economic forecasting skills at the Reserve Bank of New Zealand.  Jane is a qualified scarfie, attending Otago University and graduating with a Bachelor of Commerce in Economics with 1st class honours.  In 2014, she took a career break from ASB to travel the world and learn to snowboard.

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