New Zealand’s CPI recorded a decline in its annual inflation rate, dropping from 6.0% yoy to 5.6% yoy in Q3. This figure not only fell short of the anticipated 5.9% yoy but was also well below RBNZ’s own forecast of 6.0% yoy for the quarter. Such a deceleration would curb the likelihood of another interest rate hike in November.

A breakdown of the inflation contributors indicates that food prices played a dominant role in driving the annual inflation rate. Following closely were the costs associated with housing and household utilities, with the inflation in this sector being attributed to escalating expenses of construction and rental services.

Nicola Growden, the senior manager of consumer prices, stated, “Prices are still increasing, but are increasing at rates lower than we have seen in the previous few quarters.”

On a quarterly perspective, Q3 CPI reflected a growth of 1.8% qoq, marking an upturn from Q2’s 1.1% qoq. However, it missed the estimated rise of 1.9% qoq. An analysis of sector-wise performance shows that the transport sector experienced significant inflationary pressures. Specifically, the costs of petrol and new motor vehicles surged by 16.5% and 4.6%, respectively.

Full New Zealand CPI release here.

New Zealand’s service sector showed signs of recovery in September, with BusinessNZ Performance of Services Index rising to 50.7, up from 47.7 in August. This improvement marks an end to the three consecutive months of contraction, though the index is still languishing below the long-term average of 53.5.

Among the key components, activity/sales witnessed a notable rise, moving up to 50.9 from 44.9. Meanwhile, employment indicators slightly dipped from 51.0 to 50.6. New orders/business experienced a healthy increase, reaching 53.9 from 48.5. However, stocks/inventories decreased to 47.9 from 51.4, while supplier deliveries inched up to 49.6 from 49.2.

Addressing the sentiment, BusinessNZ’s Chief Executive, Kirk Hope, pointed out that negative sentiments remained prevalent, with 61.8% in September, only slightly lower than 63.9% in August. A significant portion of these concerns was attributed to uncertainties surrounding the General Election and rising cost of living.

New Zealand manufacturing sector has further sunk into troubled waters, as evidenced by the continued and deepening contraction observed in recent data.

BusinessNZ Performance of Manufacturing Index for September highlighted this slowdown by dropping to 45.3, down from 46.1 the previous month. This marks its most dismal performance for a month unaffected by COVID-19 since May 2009 and sits notably below the long-term average activity rate of 52.9.

Delving into the specifics, there’s a discernible decline across most metrics. While production saw a slight uptick, moving from 43.8 to 44.6, other areas weren’t as fortunate. Employment indicators slid from 47.7 to 45.2, and new orders also receded from 46.6 to 44.9. Meanwhile, finished stocks dwindled, albeit marginally, from 52.0 to 51.6, and deliveries plunged from 47.8 to 44.3.

Catherine Beard, BusinessNZ’s Director of Advocacy, highlighted the sustained downturn, pointing out that the sector “has now been in contraction for seven consecutive months, with little sign it is showing any improvement.”

On the economic front, BNZ Senior Economist Doug Steel provided a bleak perspective, remarking, “the trend remains firmly downward.” He also touched upon the challenges in discerning the exact causes of any PMI result but cited “falling sales, rising costs, and election uncertainty” as significant factors currently impacting the sector.

Full NZ BNZ PMI release here.