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 per cent in December, extending its decline from a 0.2 per cent fall in November, according to Statistics New Zealand. Prices fell 1.3 per cent on an annual basis, the biggest yearly drop since July 2012.
Poultry prices fell 6.2 per cent in December, driving a 2.7 per cent fall across the meat, poultry and fish subgroup, and leading the index lower. The meat product prices fell 3.8 per cent 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 per cent in the final three months of 2015, more than the 0.2 per cent 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. NZ’s annual CPI was running at a 0.4 per cent pace in the September quarter, below the Reserve Bank’s targeted two per cent mid-point of the mandated one to three per cent band.
With global oil prices falling to 12-year lows, investors are questioning whether NZ’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 per cent in December.
Today’s data show grocery food prices fell 0.6 per cent in December, its third month decline, and were down three per cent in 2015. Fresh milk prices fell another 0.2 per cent in December, taking its annual decline to almost 14 per cent in a year where global dairy prices collapsed. Still, cheese prices rose 6.1 per cent in December, and were up 5.2 per cent for the year.
Non-alcoholic beverages prices fell 3.4 per cent in December and were down 2.3 per cent on an annual basis, while prices for restaurant meals and read-to-eat food increased 0.3 per cent in the month for a two per cent rise in 2015. Fruit and vegetable prices rose 1.5 per cent in December for a 2.4 per cent annual increase.