By James Glynn
SYDNEY--New Zealand's consumer inflation rose more than expected in the first quarter, underscoring concerns about the emergence of price pressures across the economy just as the Middle East energy shock was beginning to develop.
The consumer-price index rose 0.9% in the quarter and 3.1% from a year earlier, Stats NZ said Tuesday. Economists had expected annual inflation to come in closer to 2.9%.
The data affirmed the hawkish stance of the Reserve Bank of New Zealand at a recent policy meeting, with Gov. Anna Breman warning that the central bank's mandate to bring annual inflation down closer to 2.0% "must be achieved."
Inflation is expected to rise further in the second quarter as the full impact of higher gasoline prices is reflected in the data, with economists warning that the RBNZ could start to raise the official cash rate in the coming months.
The first-quarter CPI data only captured the initial impact of the U.S.-Iran war, and surging increases for oil and transport are expected to filter through into a more widespread lift in overall prices, said Mark Smith, senior economist at ASB.
"A return to the 1-3% inflation target looks to be off the cards until mid-2027, with the risks of a more pronounced overshoot," he added.
Still, some caution is likely given that the economy was just emerging from a sustained economic downturn, leaving it with elevated unemployment and plenty of spare capacity in the first quarter.
The largest upward contributor to the annual inflation rate was electricity, which rose 12.5%, the data showed.
Higher electricity prices accounted for more than a tenth of the 3.1% annual increase, making it the third quarter in a row that electricity was the largest upward contributor to the annual inflation rate, Stats NZ said.
Write to James Glynn at james.glynn@wsj.com
(END) Dow Jones Newswires
04-20-26 2023ET
