April 18, 2016 2:00pm by David Farrar

Inflation now at 0.4%

The consumers price index (CPI) rose 0.2 percent in the March 2016 quarter, Statistics New Zealand said today. This follows a fall of 0.5 percent in the December 2015 quarter.

“Higher prices for cigarettes, food, and housing-related costs were countered by lower prices for petrol and air fares,” consumer prices manager Matt Haigh said.

Cigarette and tobacco prices showed the highest upward contribution, up 9.4 percent in the March 2016 quarter following a rise in excise duty in January.

“The average price of a pack of 25 cigarettes was $28.79 in the March 2016 quarter, more than double the price from six years ago when annual 10 percent excise tax increases were introduced,” Mr Haigh said.

Excluding cigarettes and tobacco, the CPI showed a fall of 0.1 percent in the March 2016 quarter.

So if you’re not a smoker, then on average prices have not increased this quarter. That’s great considering there has been steady increase in wages, benefit rates and the level of superannuation. You get increased spending power.

The CPI increased 0.4 percent in the year to the March 2016 quarter, up from a 0.1 percent increase for the year to the December 2015 quarter.

Housing-related prices continue to be the main upward contributor, up 3.0 percent in the year. This rise was led by higher prices for rent (up 2.3 percent) and newly built houses excluding land (up 5.0 percent).

Transport prices made the largest downward contribution for the year, influenced by lower petrol prices (down 5.1 percent). Excluding petrol, the CPI showed a 0.7 percent increase in the year to the March 2016 quarter.

I think around 1% is a good place to be for inflation. High enough to avoid deflation but not so high as to chew up purchasing power.

And as always I check the prices of a couple of items that Labour declared were a crisis as they were increasing so much.