New Zealand's annual consumer price index (CPI) recorded a slight 0.1 percent fall in the September quarter, defying many economists who predicted a more significant drop.
Analysts had projected the inflation rate to fall by more after a 7.3 percent annual rise in the June quarter, led by gains in construction and transport.
Although inflation had softened ever so slightly from its June peak, it remained high at 7.2 percent due to massive price increases for construction, rentals and local authority rates, Statistics NZ said.
Excluding volatile food prices, inflation was 7 percent year on year in September.
Quarterly inflation jumped 2.2 percent in September. This was up from the 1.7 quarterly increase recorded in June.
Statistics NZ prices senior manager Nicola Growden said the high inflation trend was still being underpinned by supply chain issues, labour costs and high demand.
New Zealand's 12-month construction costs were up 17 percent in September (Q3). That followed a yearly increase of 18 percent in June and March.
After housing, transport remained a big contributor to annual inflation due to high petrol and diesel prices.
Despite the pain at the pump easing slightly in recent months, "Petrol prices increased 19 percent in the year to the September 2022 quarter", Stats NZ said. "Diesel prices increased 72 percent over the same period."
In a bid to cool inflation, the Reserve Bank (RBNZ) has raised the official cash rate (OCR) to 3.5 percent from 0.25 percent in August last year - the last five moves being strong 50 basis point hikes.
Treasury earlier this year projected inflation to end 2022 at 6.7 percent. It expected inflation to remain at a hefty rate of 5.2 percent next year before falling to 3.6 percent in 2024.
The Government in recent months extended cuts to fuel excise duty, road user charges and public transport until January amid skyrocketing prices.
"Inflation is continuing to be heavily influenced by global factors, with the Ukraine war and pandemic related supply constraints affecting fuel and imported food and building material prices," Finance Minister Grant Robertson said on Tuesday.
"The Government will continue to carefully target spending in these highly uncertain times."
Robertson noted global inflation remained high. Australia's annual rate came in at 6.1 percent in its latest figures.
He said while domestic inflation was now likely down for his peak, it would likely remain high for some time.
Mark Smith, a senior economist at ASB, said while weaker global prospects should start being passed on to the New Zealand consumer, "There was no sign of this in the Q3 figures. Time will tell."
"A self-sustaining high inflation dynamic looks like it is becoming increasingly embedded, with annual core inflation rates hovering well above the top of the 1-3 percent inflation target band."
He said the 7.2 percent figure was stronger than ASB, RBNZ and market forecasts.
"Inflation is much too high and is becoming increasingly engrained. Restrictive OCR settings and a clear RBNZ focus on delivering eventual sub 3 percent inflation outcomes is needed.
"With the RBNZ having the inflation bit between its teeth all options are likely to remain on the table. We have changed our OCR call to now have a 75bp hike in the November MPS (November 23) and with two 50bp hikes in February and April 2023."
