NZ food prices fall for fifth month in December, led by cheaper chicken

Friday 15th January 2016

New Zealand food prices fell for a fifth month in December, as the cheapest chicken since 2008 and lower prices for other meat and fish led the index lower, and prompted at least one local bank to revise down its forecast for next week's inflation data.

The food price index dropped 0.8 percent in December, extending its decline from a 0.2 percent fall in November, according to Statistics New Zealand. Prices fell 1.3 percent on an annual basis, the biggest yearly drop since July 2012.

Poultry prices fell 6.2 percent in December, driving a 2.7 percent fall across the meat, poultry and fish subgroup, and leading the index lower. The meat product prices fell 3.8 percent in the year.

ASB economist Jane Turner said in a note the reading was weaker than expected, and the bank has revised down its forecast for December quarter consumer inflation when it's released next week. ASB now sees the consumers price index falling 0.3 percent in the final three months of 2015, more than the 0.2 percent decline previously forecast.

The food price index accounts for about a fifth of the CPI, and is a key component for forecasters when predicting how the broader inflation measure will track. New Zealand's annual CPI was running at a 0.4 percent pace in the September quarter, below the Reserve Bank's targeted 2 percent mid-point of the mandated 1-to-3 percent band.

With global oil prices falling to 12-year lows, investors are questioning whether New Zealand's central bank will have to cut interest rates further having said it would stay on hold for the next three years when delivering a quarter-point cut to 2.5 percent in December.

Today's data show grocery food prices fell 0.6 percent in December, its third month decline, and were down 3 percent in 2015. Fresh milk prices fell another 0.2 percent in December, taking its annual decline to almost 14 percent in a year where global dairy prices collapsed. Still, cheese prices rose 6.1 percent in December, and were up 5.2 percent for the year.

Non-alcoholic beverages prices fell 3.4 percent in December and were down 2.3 percent on an annual basis, while prices for restaurant meals and read-to-eat food increased 0.3 percent in the month for a 2 percent rise in 2015. Fruit and vegetable prices rose 1.5 percent in December for a 2.4 percent annual increase.

BusinessDesk.co.nz

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