Latest news with #MaryJoVergara
NZ Herald
5 days ago
- Business
- NZ Herald
Inflation data delivers ‘green light' for rate cut, but food prices cause concern
'Home ownership (otherwise known as building costs) fell 0.1% in the quarter to be up just 0.8% for the year,' he said. 'The last time annual building cost inflation was this low was in the depths of the GFC and, before that, the 1998/1999 recession.' Weak building costs also flowed through to property maintenance which experienced 1.4% annual inflation, he said. There was annual deflation for furniture, furnishings and floor coverings, household textiles and household appliances. But the really worrying thing was that the cost of essentials was rising far faster than the remainder of the CPI, he said. 'There are a lot of ways that you can cut this but we reckon the things that are most essential are food, accommodation and energy (electricity, gas and petrol).' 'Our very back-of-the-envelope 'essentials index' shows the cost of essentials rising at around twice the pace of the remainder of the CPI.' The biggest concern was that food price inflation had accelerated to an annual 4.2% following a 1.6% quarterly increase, he said. As well as being a significant hardship for a large portion of the population, this was adding to the headwinds for the economic recovery. 'If GDP is to pick up meaningfully then household consumption has to rise. With effective real disposable incomes under so much pressure there is very little chance of an increase in real spending.' BNZ's early forecast for the current quarter was for prices to rise 0.8% in the quarter, taking the annual rate to 2.9%. Other economists have forecast the third quarter rate to rise above the upper limit of the RBNZ's 1-3% target range. 'We also acknowledge that there is some upside risk to this,' Toplis said. 'But the good news is that we believe that will be the peak with annual inflation back near the midpoint of the RBNZ's target band by this time next year.' A key assumption was that food price inflation would soon abate, he said. 'New Zealand commodity price inflation is already past its peak and this is normally a forerunner to domestic prices, particularly for food. There is even a chance that food prices outright fall.' BNZ also assumes further falls for petrol prices drift lower. With the economy continuing to perform below capacity, there would be continued downward pressure on non-tradeable inflation, he said. KiwiBank senior economist Mary Jo Vergara noted that tradeable inflation was on the rise. Mary Jo Vergara, Kiwibank economist. Photo / Supplied 'We're no longer importing deflation,' she said. Annual tradeables inflation lifted from 0.3% to 1.2%. 'The 4.2% increase in food prices accounted for 28.5% of the lift in headline inflation,' she said. 'Domestic inflation, in contrast, continues its (slow) move south.' Annual non-tradeables inflation fell below 4% for the first time in four years to 3.7%. 'Domestic inflation had fallen some way from its 6.8% peak in 2023, but it was still sitting high above the long-term average (around 3%). 'And that's despite such a weak domestic economy.' The persistence was due to lingering strength in 'administered prices' such as rates, insurance costs and power. Annual council rates and insurance costs were running well above historic averages, up 12.2% and 6%, respectively, she said. Households were also contending with high electricity charges, climbing to 9.1% annually. 'Given excess capacity still sloshing in the economy, domestic inflation should continue to head lower. But the pace of easing is being dictated by factors largely outside of the RBNZ's control,' Vergara said. 'That's a frustration.' Overall, the data added to the case for another OCR cut in August and suggested risks were tilting towards further easing being delivered sooner than previously expected, ANZ senior economist Miles Workman said. 'We have long been expecting the RBNZ will need to cut the OCR more than they have recently been signalling,' he said. 'With [this] data not the roadblock we thought it was going to be, the risk of a follow-up cut in October is now looking higher.' Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
Newsroom
25-06-2025
- Business
- Newsroom
The big ‘but' in our slow economic recovery
By the time our quarterly figures are out, they're three months old. And recent global instability is making them look very mouldy. While there were shoots of hope when the data was crunched last week – including a slightly better-than-expected lift in Gross Domestic Product – we are about to be hit by what economists like to call 'headwinds'. In this case, those headwinds are war in the Middle East, rising petrol prices, an unstable Kiwi dollar and the effect of America's tariffs. Kiwibank economists say we're still crawling out of the deep hole we fell into last year … 'and unfortunately, we may be crawling for some time longer'. Other commentators have pointed out that the figures are showing two economies. The picture is fairly rosy if you're a dairy farmer, not so good if you're in the city struggling to pay your bills. But even that narrative has been contradicted by yesterday's 'subdued' employment confidence figures, which show poor confidence in dairying-intensive regions such as Waikato and Taranaki. And unlike the traditional picture, this time farmers are not lifting up the rest of the country, where people are struggling with issues such as food inflation. Today on The Detail we talk to Kiwibank senior economist Mary Jo Vergara to make sense of the numbers, and try to peek into the future to get a sense of where we're going. She says external factors such as trade wars and actual wars are an added risk to the outlook. 'We'll feel the impact through how markets react to this,' she says. 'We've already seen oil surge in the last two weeks – it's up around 20 percent since the start of the month – and with this conflict that just escalated over the weekend we could see oil prices take another leap higher. There'll be a risk-aversion play with a flight to safety among investors dumping equities and moving into safe havens like gold or the US dollar, so we could see the Kiwi fall off the back of this.' Vergara says New Zealand has seen really good progress in the past couple of years pulling down inflation, going from 7.3 percent in the June 2022 quarter, down to about 2.5 percent. 'Now there's risk that inflation accelerates this year, and we could see it reaching the top of [the Reserve Bank's] target band.' And while the March quarterly figures out last week depicted a strong start to the recovery coming out of recession last year, 'the more timely economic data indicators that are coming out are showing that growth might not be repeated in the quarter we're in'. 'We might see a slowdown in economic activity in the June quarter.' People aren't out there spending, and the hospitality sector in particular is suffering. Vergara says uncertainty stalls growth and we are very much influenced by global trade disruption, which is spreading across many sectors. 'It's another reason why we need more interest-rate relief from the Reserve Bank, to add a bit more certainty in this uncertain time.' Check out how to listen to and follow The Detail here. You can also stay up-to-date by liking us on Facebook or following us on Twitter.
RNZ News
24-06-2025
- Business
- RNZ News
The big 'but' in our slow economic recovery
Traditionally a strong dairy sector lifts the rest of the economy, but currently that's not the case. Photo: Supplied By the time our quarterly figures are out, they're three months old, and recent global instability is making them look very mouldy. While there were shoots of hope when the data was crunched last week - including a slightly better-than-expected lift in Gross Domestic Product - we are about to be hit by what economists like to call 'headwinds' - in this case, war in the Middle East, rising petrol prices, an unstable Kiwi dollar and the effect of America's tariffs. Kiwibank economists say we're still crawling out of the deep hole we fell into last year... "and unfortunately, we may be crawling for some time longer". Other commentators have pointed out the figures are showing a tale of two economies. The picture is fairly rosy if you are a dairy farmer, not so good if you are in the city struggling to pay your bills. But even that narrative has been contradicted by Tuesday's "subdued" employment confidence figures, which show poor confidence in dairying-intensive regions such as Waikato and Taranaki. And unlike the traditional picture, this time farmers are not lifting up the rest of the country, where people are struggling with issues such as food inflation. Today on The Detail we talk to Kiwibank senior economist Mary Jo Vergara to make sense of the numbers, and try to peek into the future to get a sense of where we are going. She says external factors - trade wars and actual wars - are an added risk to the outlook. "We'll feel the impact through how markets react to this," she says. "We've already seen oil surge in the last two weeks - it's up around 20 percent since the start of the month - and with this conflict that just escalated over the weekend we could see oil prices take another leap higher. "There'll be a risk-aversion play with a flight to safety among investors dumping equities and moving into safe havens like gold or the US dollar, so we could see the Kiwi fall off the back of this." Vergara says New Zealand has seen really good progress in the last couple of years pulling down inflation, going from 7.3 percent in the June 2022 quarter, down to about 2.5 percent. "Now there's risk that inflation accelerates this year, and we could see it reaching the top of [the Reserve Bank's] target band." And while the March quarterly figures out last week depicted a strong start to the recovery coming out of recession last year, "the more timely economic data indicators that are coming out are showing that growth might not be repeated in the quarter we're in. "We might see a slow-down in economic activity in the June quarter." People are not out there spending, and the hospitality sector in particular is suffering. Vergara says uncertainty stalls growth and we are very much influenced by global trade disruption, which is spreading across many sectors. "It's another reason why we need more interest rate relief from the Reserve Bank, to add a bit more certainty in this uncertain time." Check out how to listen to and follow The Detail here . You can also stay up-to-date by liking us on Facebook or following us on Twitter .
RNZ News
17-06-2025
- Business
- RNZ News
Where to next, for the Kiwi economy
business food 9:20 am today Food prices have risen at their highest rate in 18 months, and inflation is heading towards the top of the Reserve Bank's 3 per cent target. So what are the implications for the economy and hopes the Government has for growth? Stats NZ's latest food prices index was up 4.4 per cent on the last year with - meat, poultry and fish the biggest risers for the year. Butter, milk and cheese drove grocery prices - the average price for butter was up 51 per cent over the past year, with cheese up 30 per cent. Kiwibank says the outlook for growth is cloudier than ever - its economist Mary Jo Vergara explains.
Scoop
14-06-2025
- Business
- Scoop
Kiwibank's Latest 2025 Outlook: Tariff Turmoil Stalls Growth – Are Rate Cuts The Remedy?
Per capita, economic activity remains subdued more so than during the global financial crisis. As a result, Kiwibank Economists have revised the 2025 growth forecast to 0.9% from 1.4%. Signs of Recovery: Green shoots are emerging, albeit slower than initially anticipated. Kiwibank Economists now forecast economic growth of just 0.9% for 2025, signalling recovery is underway. Tariff Turmoil: Global trade disruptions – driven by tariff changes – pose the biggest threat to recovery, stalling global growth. Rates to the Rescue: Monetary policy remains central to the recovery. The Reserve Bank has already cut rates by 225 basis points, with a further 75 basis points of easing expected by year-end to support confidence and stimulate growth. After emerging from last year's recession, Kiwibank's latest Economic Outlook reflects a recovery that has begun – but is softer than previously forecast. While early signs of stabilisation were visible earlier last year, such as expansion in PMIs and solid rural export volumes. However, global instability is dampening momentum. Mary Jo Vergara, Senior Economist at Kiwibank, says 'The early signs of recovery – as fragile as they are – have been driven mainly by the external sector, the sector most vulnerable to ongoing global uncertainty. A slowdown in global growth now looks certain. Both the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have cut their forecasts – just as we're starting to recover.' 'We've climbed out of the deep hole we fell into last year. But it's been a tough time for many businesses and households. What's needed now is policy support and sustained confidence to build momentum.' Per capita, economic activity remains subdued – more so than during the global financial crisis. As a result, Kiwibank Economists have revised the 2025 growth forecast to 0.9% from 1.4%. The labour market remains tight, though some softening is expected before a gradual improvement into 2026. Tariffs and trade tensions weigh on growth Since the last Kiwibank Economists Outlook, global growth forecasts have been lowered. The IMF now expects 2.8% growth in 2025 – down from 3.3%. The US – New Zealand's second largest export market – has seen growth cut by more than a full percentage point. Growth in China, our largest trading partner, is projected to hover around 4%. Tariff changes and broader trade tensions are unsettling markets. While inflation risks remain, it is weaker global demand that now poses the greater concern, dampening investment and spending globally. 'The global economic landscape is shifting rapidly, and while uncertainty remains high, it's crucial that businesses stay alert to these changes. Flexibility and informed decision-making will be key to weathering this period of slower growth. New Zealand's connection to the global market means we're not immune to these challenges. But by understanding the risks and adapting early, we can position ourselves so we can harness the turning of the tide,' says Vergara. Rate Relief Still Needed The Reserve Bank of New Zealand (RBNZ) has cut interest rates by 225bps since August 2024, with further easing expected. 'We forecast another 75 basis points of cuts, taking the OCR to 2.5% by year-end,' Vergara says. 'Wholesale markets have just one more 25bp cut to 3% priced. That's not enough, in our view. We're likely to need another 50bps beyond that, to provide the necessary support.' The RBNZ may pause in July at 3.25%, but we expect the data to evolve in a way that demands more rate relief. Falling deposit rates and improving credit availability are expected to stimulate more borrowing and spending through the second half of the year. 'If momentum continues and global headwinds ease, we expect a stronger 2026,' Vergara concluded.
