New Zealand Inflation Slows to 1.9%

New Zealand’s inflation rate slowed to the lowest level in seven quarters as a recession curbed consumer demand, prompting companies to cut prices.

Consumer prices rose 1.9 percent in the year ended June 30, Statistics New Zealand said. Inflation slowed from 3 percent in the year to March. From the first quarter, prices gained 0.6 percent.

The inflation rate has tumbled from an 18-year high of 5.1 percent in the year ended Sept. 30 amid the worst recession in three decades that has driven up unemployment and dented confidence. Reserve Bank Governor Alan Bollard has cut the official cash rate to a record-low 2.5 percent and last month said he is unlikely to increase borrowing costs until late 2010.

The inflation rate fell back into the central bank’s target range of between 1 percent and 3 percent for the first time since 2007.

Twenty three percent of companies cut prices in the second quarter, according to a survey by the New Zealand Institute of Economic Research Inc. About 53 percent of companies surveyed said profits fell, the Wellington-based institute said on July 7.

Inflation accelerated last year amid soaring fuel and air travel costs. The consumer price index rose 1.6 percent in the second quarter of last year and 1.5 percent in the third quarter.

Many of those prices are now declining. Gasoline prices declined 17 percent from the year earlier and international airfares tumbled 21 percent, the statistics bureau said today.

Non-tradable prices rose 0.5 percent from the first quarter, the smallest gain in eight years. The measure gained 3.3 percent from a year earlier.

Non-tradable inflation was led by a 1.6 percent gain in electricity charges and a 2.8 percent jump in the price of beer. The cost of buying and building a new house increased 0.2 percent.

Tradable prices rose 0.8 percent from the first quarter led by higher fuel and used-car prices. International airfares fell 14 percent in the quarter.

New Zealand Inflation Slows to 1.9%, Bloomberg
7/15/2009 7:56:46 PM