ANZ analysts note that New Zealand’s headline CPI increased 0.6% q/q in Q2, which saw annual inflation pick up to 1.7% y/y from 1.5%.

“Strength was driven by tradable prices, up 0.9% q/q (0.1% y/y), which was boosted by petrol price strength and will be transitory. Outside of petrol prices, there was some broader strength in tradable prices, likely reflecting recent NZD weakness. Non-tradable inflation rose 0.3% q/q, boosted by rents, insurance, and restaurant meals. Annual non-tradable inflation was flat at 2.8% – a respectable five-year high, but still short of the 3% or more needed to see headline inflation comfortably and sustainably at 2%. Core inflation measures did tick up slightly, despite the reasonably subdued non-tradable inflation print. Underlying inflation continues to track just short of 2%, following strength early in 2018. Annual trimmed mean measures reversed last quarter’s tick down, to sit around 2% across various measures of trim. The weighted median also ticked up from 2.2 to 2.3% y/y, and inflation excluding food and energy increased from 1.5% to 1.7% y/y. All up, it looks like Q2 CPI is as good as it will get for domestic inflation for some time.”