Food prices fall in April, on cheaper groceries, fruit and vegetables

New Zealand food prices fell to a four-month low in April after discounting in supermarkets and cheaper fruit and vegetables.

The food price index fell 0.3% in April, after a 0.1% gain in March, taking the measure to its lowest level since December, according to Statistics NZ. On an annual basis food prices were 1% higher in April than they were in the same month last year, rising at a slower pace than March's 1.9% gain, which was the biggest increase in three years. (See graph below)

The food price index makes up nearly one-fifth of the broader consumers price index, which has dropped below the Reserve Bank's 1-3% range, rising at a 0.8% annual pace in 2014. Reserve Bank governor Graeme Wheeler has kept the official cash rate on hold at 3.5% since September but flagged any further downward surprises in New Zealand's already tepid pace of inflation may warrant an interest rate cut. Traders are now pricing in a 46% chance of a rate cut at its next meeting in June.

On a monthly basis grocery foods, which make up more than a third of the index, dropped 0.9% in April, as discounted cakes and biscuits slid 6.3%. Milk, cheese and eggs, which make up part of the grocery measure, fell 0.4% led by a 2.2% drop in cheese prices. Fruit and vegetable prices fell the most in the month, down 1.2%, as seasonally low fruit prices offset a 0.1% increase in vegetables.

Meat, poultry and fish prices rose 0.4%, with beef prices now at their highest level, Statistics NZ said. Restaurant meals and ready-to-eat food also increased 0.2%, and non-alcoholic beverage prices rose 0.3%.

The annual gain was led by a 5.3% jump in fruit and vegetable prices, as New Zealanders paid more for lettuce, potatoes and tomatoes, while bananas and strawberry prices also rose. Meat, poultry and fish rose 2%, restaurant meals and ready-to-eat food price increased 1.6% and non-alcoholic beverages were up 1.8%.

Grocery food prices fell 1.5% in April compared to the same month a year earlier, as prices for bread, butter and cheese fell.

(BusinessDesk)