New Zealand's data fog leaves its central bank flying blind

New Zealand's lagging economic data forces early rate cuts, highlighting need for more timely and accurate statistics.

Lags in New Zealand's official economic data are creating a fog for policy makers that recently forced them to veer off course and cut interest rates a whole year earlier than projected, badly wrong footing financial markets.

Years of tight funding by successive governments have left statisticians struggling to keep up with a rapidly changing economy, and nowhere more so than with inflation.

The more than two-decade old system they use is not able to calculate monthly data, making the country rare among developed nations in reporting consumer price indexes (CPI) quarterly, rather than monthly. This makes it harder for the Reserve Bank of New Zealand (RBNZ) to spot turning points in a timely manner.

"We are behind in terms of most advanced economies," Karen Silk, RBNZ Assistant Governor, told Reuters in an interview. "Monthly CPI...(it) would be delightful to get that." As recently as May, the central bank was seriously considering whether it needed to hike rates further to bring inflation to heel. By its next meeting in early July, private business surveys and card spending data from banks had made it more confident cost pressures were easing. It had to wait another week for the official CPI report for the second quarter, which showed inflation slowing faster than most predicted.

By August, the outlook had swung 180 degrees and it cut rates a quarter point to 5.25%, flagging a lot more to come.

"We're still waiting to find out what the June GDP is, that's months back," Governor Adrian Orr said after the August decision. June quarter GDP is not due until Sept. 19 almost two months after the first reading on U.S. growth.

Stats NZ, the official data bureau, notes it is within the International Monetary Fund's 90-day guideline.