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Comparing services inflation in New Zealand to abroad

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• We find that services inflation appears more elevated and broad-based in New Zealand than in a number of other advanced economies. • In the March 2024 quarter, annual services CPI inflation was 3 percentage points higher than a level that has historically been consistent with headline CPI inflation at target in New Zealand (“benchmark†). This difference is broadly similar to the United States, but higher than in the euro area and Australia. • The component drivers of services inflation are broad-based in New Zealand, suggesting we are experiencing relatively generalised inflationary pressure in parts of the services sector. While some other advanced economies have a similar dynamic, others appear to be experiencing a relatively larger impulse from relative price shifts. • Recent inflation dynamics appear to correlate with broad macroeconomic trends abroad. While a weaker macroeconomic backdrop in New Zealand is yet to materially soften inflation in services, disinflation elsewhere should give us confidence that a dampening in overall demand conditions will bring inflation back to target over the medium term.

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  • James Antwis, 2024. "Comparing services inflation in New Zealand to abroad," Reserve Bank of New Zealand Analytical Notes series AN2024/04, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbans:2024/04
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