NZ: Broad weakness in price pressures - Westpac

Analysts at Westpac note that New Zealand’s Q2 CPI inflation was weaker than the market or the RBNZ expected, at 0.2% qoq, 1.7% yoy and while a pullback from Q1’s 2.2% was expected, due to food and fuel, the degree of change was a surprise, as was the broad-based nature of the weakness. 

Key Quotes

“House prices have cooled, and probably present an additional downside surprise to the RBNZ. Auckland is leading, with a 1% price decline in June, while the lagging regions are seeing slower growth.”

“Much of the housing slowdown can be pinned on higher mortgage rates and tighter lending conditions.”

“The RBNZ’s OCR projections, which currently include a hike around end-2019, will be watched for any downward revisions at the August MPS.”