Food prices fall for fifth month

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

The food price index fell 0.8% in December, extending its drop from a 0.2 % fall in November, according to Statistics New Zealand.

Prices fell 1.3% on an annual basis, the biggest yearly drop since July 2012.

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

ASB economist Jane Turner says prices were weaker than expected, and the bank has revised down its forecast for December quarter consumer inflation due to be released next week.

ASB now sees the consumers price index (CPI) falling 0.3% in the final three months of 2015, more than the 0.2% 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% pace in the September quarter, below the Reserve Bank's targeted 2% mid-point of the mandated 1-3 % 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.

Today's data show grocery food prices fell 0.6% in December, its third drop in as many months, and were down 3% in 2015.

Fresh milk prices fell another 0.2% in December, taking the annual drop to almost 14% in a year where global dairy prices collapsed. Still, cheese prices rose 6.1% in December, and were up 5.2% for the year.

Non-alcoholic beverages prices fell 3.4% in December and were down 2.3% on an annual basis, while prices for restaurant meals and ready-to-eat food increased 0.3% in the month for a 2% rise in 2015.

Fruit and vegetable prices rose 1.5% in December for a 2.4% annual increase.

(BusinessDesk)