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Consumers Price Index: December 2013 quarter
Embargoed until 10:45am  –  21 January 2014
Commentary

CPI rises 0.1 percent in December 2013 quarter

The consumers price index (CPI) rose 0.1 percent in the December 2013 quarter. This follows rises of 0.9 percent in the September 2013 quarter and 0.2 percent in the June 2013 quarter.

International air fares (up 12 percent), domestic air fares (up 6.7 percent), and package holidays (up 7.3 percent) all made strong upward contributions to the CPI. International air fares show a seasonal pattern and rise in the December quarter.

Prices for housing and household utilities also rose (up 0.5 percent), reflecting higher prices for property maintenance (up 1.4 percent), purchase of newly built houses (up 1.1 percent), and rentals for housing (up 0.4 percent).

Higher prices were also recorded for milk, cheese, and eggs (up 4.2 percent).

These rises were partly offset by seasonally lower prices for vegetables (down 20 percent) and cheaper petrol (down 3.5 percent after reaching an all-time high last quarter).

 Graph, Index points contribution to consumers price index, December 2013 quarter.

CPI shows 1.6 percent annual increase

The CPI increased 1.6 percent in the year to the December 2013 quarter, after increases of 1.4 percent and 0.7 percent in the years to the September 2013 and June 2013 quarters, respectively.

Nearly half of the annual movement came from higher prices for housing and household utilities (up 3.2 percent). Prices for the purchase of newly built houses (up 4.7 percent), rentals for housing (up 2.1 percent), property maintenance (up 4.3 percent), and electricity (up 3.0 percent) all rose in the latest year.

Higher prices were also recorded for:

  • alcoholic beverages and tobacco (up 3.8 percent)
  • food (up 1.3 percent)
  • miscellaneous goods and services (up 2.4 percent)
  • health (up 2.9 percent).

By group, the main downward contributions came from:

  • communication (down 2.8 percent)
  • clothing and footwear (down 1.4 percent) 
  • household contents and services (down 0.6 percent).

Individually, the main upward contribution came from higher prices for cigarettes and tobacco (up 12 percent). Higher prices were also recorded for:

  • milk, cheese, and eggs (up 7.3 percent) 
  • local authority rates (up 4.1 percent).

The main individual downward contributions came from lower prices for:

  • audio-visual and computing equipment (down 10 percent) 
  • confectionery, nuts, and snacks (down 3.7 percent) 
  • telecommunication services (down 2.2 percent).

Rise in housing-related prices

Prices for housing and household utilities rose 0.5 percent in the December 2013 quarter, after rises of 0.9 percent and 1.1 percent in the September 2013 and June 2013 quarters, respectively.

Four of the five subgroups made upward contributions in the December 2013 quarter:

  • property maintenance (up 1.4 percent)
  • purchase of newly built houses (up 1.1 percent), with Canterbury up 1.3 percent and Auckland up 1.5 percent
  • rentals for housing (up 0.4 percent), with Canterbury up 0.7 percent and Auckland up 0.6 percent
  • property rates and related services (up 0.4 percent).

This is the first quarter since the December 2011 quarter that the price rise for newly built houses was stronger in Auckland than in Canterbury.

Of the newly built house prices reported by respondents in the December 2013 quarter and after adjusting for quality change, 53 percent showed increases. In Canterbury, 76 percent showed increases and 64 percent showed increases in Auckland.

Excluding the December 2010 quarter when GST increased, the 53 percent figure for the latest quarter is the highest since the September 2007 quarter.

These price rises were partly offset by lower prices for electricity (down 0.4 percent).

Annual prices

On an annual basis, prices for housing and household utilities increased 3.2 percent.

All five of the subgroups showed upward movements:

  • newly built houses (up 4.7 percent), with Canterbury up 9.5 percent and Auckland up 4.4 percent
  • rentals for housing (up 2.1 percent), with Canterbury up 5.1 percent and Auckland up 2.4 percent
  • property maintenance (up 4.3 percent)
  • household energy (up 2.4 percent)
  • local authority rates (up 4.1 percent).

Excluding Canterbury newly built house prices rose 3.9 percent.  

Graph, Housing and household utilities group and selected classes, quarterly indexes, December 2009 to December 2013.

Transport prices rise 0.3 percent

In the December 2013 quarter, transport prices rose 0.3 percent. Higher prices for international and domestic air fares (up 12 percent and 6.7 percent respectively) were largely offset by cheaper petrol (down 3.5 percent after reaching an all-time high last quarter). Overall, prices for 91 octane petrol at the end of the quarter were about 1.1 percent above the average pump price for the quarter.

Prices for international air fares show a seasonal pattern, and rise in the December quarter. In the latest quarter, higher fares for flights to Asia and Europe were the main contributors. This quarter’s increase in international air fares is the largest since a 14 percent rise in the December 2009 quarter, and fares are now at their highest level since the December 2008 quarter.

Annual prices

On an annual basis, transport prices increased 0.6 percent, influenced by higher prices for domestic air fares (up 6.7 percent) and petrol (up 0.9 percent). These were partly offset by lower prices for new and second-hand cars (down 2.7 percent and 0.6 percent, respectively). The New Zealand dollar is much stronger against the yen than it was a year ago.

 Graph, Transport group and selected classes, quarterly indexes, December 2009 to December 2013.

Food down 1.3 percent due to seasonally cheaper vegetables

Food prices fell 1.3 percent in the December 2013 quarter, reflecting seasonally cheaper prices for vegetables (down 20 percent). Tomatoes, lettuce, and cucumber were all about half the price as they had been in the September 2013 quarter. Strawberries and capsicums also showed seasonal price falls.

For more information on seasonality in fresh produce and how this affects prices, see Fresh fruit and vegetable prices – our global connection.

Prices for milk, cheese, and eggs rose 4.2 percent, reflecting higher prices for fresh milk (up 5.2 percent) and yoghurt (up 8.8 percent). The 4.2 percent rise for milk, cheese, and eggs is the highest quarterly rise since the September 2010 quarter, and prices are now 1.3 percent below their all-time peak in the September 2011 quarter.

Annual prices

On an annual basis, food prices increased 1.3 percent. This reflected higher prices for restaurant meals and ready-to-eat food (up 1.7 percent) and fresh milk (up 7.8 percent). Fresh milk prices fell in each quarter of 2012, before turning up in the March 2013 quarter. They are still 2.6 percent below their all-time peak in the September 2011 quarter.

For more information on food prices, see the Food Price Index monthly release.

 Graph, CPI, food group, and vegetables subgroup, quarterly indexes, December 2009 to December 2013.

Summary of other group movements in the CPI

In the December 2013 quarter, the following other groups rose:

  • recreation and culture (up 1.1 percent)
  • clothing and footwear (up 0.8 percent)
  • miscellaneous goods and services (up 0.3 percent)
  • household contents and services (up 0.6 percent)
  • health (up 0.3 percent).

Combined, these other groups contributed 2.32 index points to the overall CPI increase of 1.11 index points.

In the December 2013 quarter, the following other groups fell:

  • alcoholic beverages and tobacco (down 0.4 percent)
  • communication (down 0.4 percent)
  • education (down 0.2 percent).

Combined, these groups contributed -0.44 index points to the overall CPI increase of 1.11 index points.

Within recreation and culture, seasonally higher prices for package holidays (up 7.3 percent) were the main upward contributor. The largest downward contribution was from lower prices for audio-visual and computing equipment (down 2.2 percent).

The rise in the clothing and footwear group was influenced by higher prices for women’s clothing (up 1.5 percent).

Furniture and whiteware prices also rose, after falls in the September 2013 quarter and the December 2012 quarter. Furniture and whiteware had an upward contribution of 0.36 index points in the December 2013 quarter, compared with a downward contribution of 0.84 index points in the December 2012 quarter.

Annual prices

In the year to the December 2013 quarter, prices increased for:

  • cigarettes and tobacco (up 12 percent), reflecting a rise in excise duty
  • pharmaceutical products (up 9.8 percent), reflecting a rise in prescription charges
  • medical services (up 2.2 percent)
  • dwelling insurance (up 17 percent).

The main downward contribution for the year came from audio-visual and computing equipment (down 10 percent). Prices also fell for telecommunication services (down 2.2 percent) and clothing (down 1.3 percent).   

CPI analytical series

In the December 2013 quarter, the tradable component of the CPI fell 0.5 percent and the non-tradable component rose 0.5 percent.

Lower prices for vegetables and petrol were the main downward contributors to the tradable component. Higher prices for international air fares and dairy products were the main upward contributors.

The rise in the non-tradable component was mainly influenced by higher prices for property maintenance, purchase of newly built houses, and domestic air fares. Higher prices were also recorded for rentals for housing.

Annual

For the year to the December 2013 quarter, the tradable component decreased 0.3 percent. The main downward movements came from audio-visual and computing equipment, and confectionery, nuts, and snacks. These were partly offset by higher prices for dairy products.

Prices for the non-tradable component increased 2.9 percent. This is the highest annual increase since the year to the September 2011 quarter. Higher prices came from cigarettes and tobacco, and housing and household utilities. The main downward contributor was telecommunication services.

Graph, Consumers price index, non-tradables, and all groups - quarterly indexes, December 2009 to December 2013.

In the December 2013 quarter, the  trimmed mean measures – which exclude extreme price rises and falls – had quarterly rises ranging from 0.2 to 0.3 percent. This indicates the 'underlying' price change (ie excluding extreme price rises and falls) was slightly above the rise in the all groups CPI.

For the year to the December 2013 quarter, the annual trimmed mean measures showed increases of between 1.6 percent and 1.7 percent. This indicates that the 1.6 percent annual increase in the all groups CPI was not significantly influenced by extreme price rises and falls.

Graph, Trimmed means and all groups, percentage change, December 2013 quarter.   

Impact of items that rose and fell in price

The graph below shows the impact of the items that rose and fell in price. Comparing the December 2013 quarter with the September 2013 quarter, the impact of the items that rose in price is smaller, and the impact of items that fell in price is larger. This led to a 0.1 percent rise for the December 2013 quarter CPI, following a 0.9 percent rise in the September 2013 quarter.

Graph, Index points contribution to consumers price index, December 2010 to December 2013 quarter.

Further information is included in table 13 of this release.

Annual indexation of New Zealand superannuation rates and welfare benefits

Adjustments made to New Zealand superannuation rates and welfare benefits rates at 1 April 2014 will be based on the percentage change in the CPI 'all groups less cigarettes and tobacco subgroup' from the December 2012 quarter to the December 2013 quarter, which is an increase of 1.38 percent.

CPI rolling review of retail outlets

Statistics NZ price collectors visit retail outlets to collect prices for the CPI. We are undertaking an ongoing rolling review of these outlets. See CPI rolling review of retail outlets in the data quality section of this release for further details.

CPI review update

In June 2013 we began a CPI review. CPI reviews are carried out every three years to help ensure that the CPI basket of goods and services continues to reflect household spending patterns.

The CPI is made up of a representative basket of goods and services purchased by New Zealand households. As part of the review, the relative importance of these goods and services will be updated, using information from the Household Economic Survey: Year ended June 2013 and other sources. We will also reselect the goods and services that are included in the basket.

Some of the recommendations from the CPI Advisory Committee 2013 report will also be implemented in the review. We'll let you know which recommendations will be implemented when final decisions are made.

We’ll complete the latest review when the September 2014 quarter CPI is published in October 2014.

For more information on the 2014 CPI review please contact:

Nick Martelli
Wellington 04 931 4600

Relative importance of home ownership and property maintenance

In quality assurance checks for the 2012/13 Household Economic Survey (HES), released in late November 2013, a classification error was found in the housing and household utilities group. For both the 2006/07 and 2009/10 HES years, some expenditure that should have been coded to property alterations, additions, and improvements was instead coded to property maintenance. See Revision note: Household Economic Survey for further details. HES figures for 2006/07 and 2009/10 have been revised. The largest change resulting from these revisions and affecting 2009/10 is that 'property maintenance services' was overstated by about $840 million, and 'services for property alterations, additions, and improvements' was understated by the same amount.

We implemented the current CPI weights, for the June 2011 quarter, in the September 2011 quarter. The 2009/10 HES was our main source of information for the CPI expenditure weight of the property maintenance subgroup and the property alterations, additions, and improvements component of the weight for the home ownership (ie purchase of newly built housing) subgroup.

We looked at how the CPI would have tracked from the September 2011 quarter to the December 2013 quarter if the revised 2009/10 HES figures for property maintenance and for property alterations, additions, and improvements had been used to reweight the CPI subgroups for property maintenance and home ownership. There would not have been a material cumulative effect on either the all groups CPI or the housing and household utilities group. When rounded to the nearest index point, the all groups CPI for the December 2013 quarter would have remained at 1188, as property maintenance and purchase of newly built housing have shown similar rates of inflation.

We will next update the relative importance of the goods and services in the CPI basket, using 2012/13 HES, when the September 2014 quarter CPI is published. We will use the current weights, based on the first-published 2009/10 HES, for two more quarters – the March and June 2014 quarters. We will monitor the situation for these two quarters and will update the relative importance of the property maintenance and home ownership subgroups only if there is a material effect on the all groups CPI.

For more detailed data from the CPI, see the Excel tables in the 'Downloads' box.

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