New Zealand food prices rose in April, snapping two declines, as eggs and dairy products lifted grocery bills in the month, though inflation remained contained as the strong kiwi dollar kept a lid on imported prices.
According to Scoop, the food price index advanced 0.6 per cent in April following a 0.3 per cent fall in March, according to Statistics New Zealand. Food prices increased 1.5 per cent on an annual basis, accelerating from the 1.2 per cent pace in March with all five components of the index rising in the year.
The monthly gain was led by a 1 per cent gain in grocery food prices, as milk, cheese and eggs gained 1.4 per cent, while bread and cereals rose 1 per cent as did confectionary, nuts and snacks. On an annual basis, grocery prices rose 1 per cent with milk, cheese and eggs making the biggest contribution, up 6.7 per cent on a 28 per cent lift in the price of butter.
The Reserve Bank is watching the pace of rising consumer prices, of which food prices contribute almost 19 per cent, having flagged increased price pressures as a reason behind its shift to tighter monetary policy this year. Governor Graeme Wheeler has hiked interest rates 50 basis points since March in a bid to curb inflation, although April’s first quarter consumers price index showed a slower-than-expected pace of inflation.
"The low level of food price inflation, along with the effects of the high New Zealand dollar on other areas of tradable inflation, are contributing to the overall contained inflation environment," Christina Leung, an ASB economist said in a note. "We expect rising inflation pressures will become more apparent later next year when the dampening influence of the high New Zealand dollar lessens, and economic activity ramps up and underpins a lift in underlying inflation."
Last week, Governor Wheeler signalled rate rises may not be as regular as previously assumed if the exchange rate remains strong. The high kiwi dollar weakens tradables inflation and would be a factor in the bank’s view of the "extent and speed" of hikes in interest rates, Wheeler said at the time.
The figures show meat, poultry and fish prices rose 0.9 per cent as beef prices rose 3.1 per cent and pork advanced 4.5 per cent. Meat prices led the annual rise, up 2.6 per cent, with beef gaining 2.6 per cent, lamb rising 9 per cent and pork increasing 9.1 per cent. Overall meat prices are 0.8 per cent below the October peak, Statistics NZ said.
Fruit and vegetable prices rose 0.4 per cent in April on seasonally higher prices for tomatoes and strawberries, and increased 0.9 per cent in the year.
Restaurant meals and ready-to-eat food prices rose 0.3 per cent in the month and gained 2.2 per cent on an annual basis, with ready-to-eat food rising 2.4 per cent and restaurant meals increasing 1.5 per cent.
Prices of non-alcoholic beverages fell 0.8 per cent in April, the only sub-group to decline in the month. On an annual basis, prices rose 1.6 per cent, as coffee and tea increased 3 per cent while soft drinks, juices and water gained 1.2 per cent.
