Weekly market wrap up

Stats NZ’s latest Selected Price Indexes were a timely reminder that inflation often shows up first in the shopping basket. Food prices rose 2.5% in January, the largest monthly increase in four years, following four consecutive declines. On an annual basis, prices are now 4.6% higher. Grocery items, including many household staples, lifted 2.3% over the month, while fruit and vegetables recorded a sharp jump. Even takeaway coffee now costs around 32 cents more than a year ago - a small increase on paper, but noticeable when it becomes part of a weekly routine.

Tuesday 17 February marked the start of Lunar New Year, celebrated across the globe and in China with enough red envelopes to keep the stationery industry busy. It is the Year of the Horse, traditionally associated with energy and forward momentum. This year’s public holiday runs for nine days, and the spending backdrop matters. During last year’s eight-day break, China recorded 501 million domestic tourist trips and around CNY 677 billion, equivalent to roughly NZD 124 billion, in tourism spending as families travelled, dined and exchanged gifts at scale. The festivities arrive, however, against an economy still struggling to regain stronger momentum.

The Reserve Bank left the Official Cash Rate unchanged at 2.25 percent this week, marking the first decision under new Governor Anna Breman. While there is always a touch of theatre around a first outing, this meeting was more measured than dramatic. The tone acknowledged that inflation pressures have eased from their peaks but remain sticky enough to warrant caution. Economic growth is still subdued, and households are feeling the cumulative weight of prior tightening, yet the Bank signalled it is not in a hurry to shift settings again. In other words, this was about continuity rather than a clean break from the past. Markets appeared to take it in stride, with limited reaction suggesting few were caught off guard.

The UK unemployment rate rose to 5.2 percent in the three months to December 2025, up from 5.1 percent previously and slightly above market expectations, which had pencilled in no change. It is now sitting at its highest level in five years. On its own, a tenth of a percent does not sound dramatic, but the broader trend is what stands out. The labour market has been gradually losing heat, vacancies have softened from their earlier peaks, and businesses appear a touch more cautious. For the Bank of England, this adds another layer of complexity as inflation pressures linger while employment conditions cool. It is not an abrupt deterioration, but the direction is clear enough.