New Zealand, like Australia, Britain, India, China, Japan and the US continues to face increasing pressures from rising inflation: be it wholesale or retail.
In every case the drivers are similar, rapid rises in the cost of food and other commodities, especially oil prices. In countries like Australia there is an additional reason: capacity constraints and a booming economy that is being slowed to bring inflation under control.
In Britain wholesale price inflation hit a 19 year high in March, while in France consumer inflation jumped to the fastest pace in at least 12 years in March, led by surging energy and food costs.
Consumer prices climbed by an annual 3.5%, up from a rate of 3.2% in February, based on the European Union-harmonized methods.
France’s national statistics agency, Insee said that was the fastest pace since 1996, when it started reporting the data. Prices increased 0.8% from February, also the biggest monthly gain on record.
In the US Producer prices jumped by 1.1% in March, the second highest rise on record. So-called core inflation (excluding oil and food) rose a more sedate 0.2%
Figures out yesterday show that New Zealand’s annual inflation rate rose in the March quarter because of higher fuel and food prices.
That leaves little room for a rate cut in New Zealand, although the rapidly sliding house sector and consumer confidence suggests one more be needed sooner rather than later.
Statistics New Zealand said inflation rose 0.7% in the quarter to hit an annual rate of 3.4% in the year ended March 31 after rising at an annual rate of 3.2% in December.
The March quarter increase however was 0.7%, compared to the 1.2% surge in the December quarter. That does give the Reserve Bank some room to wriggle if the rapid deflating of the housing boom in particular starts dragging the rest of the economy with it.
That’s considered unlikely after the news late last week of the 2008 dairy distribution to farmers from Fonterra of around $NZ8 to $NZ9 billion, depending on the impact of a recent drought.
If this season’s milk production was on a par with last year’s 1.25 billion kg of milksolids, the cooperative’s 10,711 farmer shareholders would each receive an average payment of more than $NZ850,000.
The Reserve Bank will be aware of the inflationary potential from this huge payment.
RBNZ Governor, Allan Bollard said last month that higher gasoline and food costs may keep inflation above his target until mid-2009.
He forecast that price increases will accelerate to 3.7% for the year to September, and won’t drop below 3% until midway through next year.
He said borrowing costs needed to stay high "for a significant time yet” to ensure inflation falls back toward the middle of his target range.
Statistics NZ said that non-tradable prices rose 1.1% in the March quarter, from the fourth quarter when they rose 0.7%, and increased 3.5% from a year earlier.
As expected fuel and food prices and the cost of owning a home made the biggest contributions to first-quarter inflation.
Petrol prices rose 4% in the quarter and 21% over the year to march; excluding oil and petrol, prices gained 0.5% in the quarter and 2.5% in the 12 months.
Food costs rose 1.8%, led by a 19% jump in cheese prices and more expensive bread, butter and cereals. Food increased 5.1% over the year from March, 2007.
Electricity, gas and waste disposal charges rose ,as did rents but the cost of buying and building a new house had its lowest rise for four and a half years: 0.9%.
The strong NZ dollar trimmed the price of new cars, appliances, computers and overseas holidays.
