Food prices rise in June led by seasonal gains in vegetables

New Zealand food prices rose in June, led by seasonal gains for vegetables.

Food prices increased 0.4 percent in June from May, Statistics New Zealand said. Prices were 0.5 percent lower than June last year, the agency said.

Vegetable prices led the gains in June, advancing 8.4 percent from May due to seasonally higher prices as cucumber jumped 72 percent, capsicum rose 44 percent, lettuce increased 16 percent, and tomatoes were up 13 percent. After adjusting for seasonal variations, food prices fell 0.9 percent as vegetable prices dropped 6.5 percent.

The food price index accounts for about 19 percent of the consumers price index, the Reserve Bank's mandated measure, and is typically seen as a barometer of wider inflation. Annual inflation rose at a 0.4 percent pace in the March quarter, and Statistics NZ will release data for the June quarter on July 18.

ASB Bank economist Kim Mundy said the food prices data was softer than expected, prompting it to pull down its forecast for second quarter inflation to 0.5 percent, below the Reserve Bank's 0.6 percent forecast. ASB didn't change its view for interest rates and continues to expect the Reserve Bank to cut in August and November, she said.

Today's data show the decline in annual food prices was led by lower grocery prices which dropped 2.3 percent. Dairy product prices weakened, with cheese prices down 9.5 percent, fresh milk slipping 3.9 percent and yogurt falling 9.2 percent. The average price of a kilo of cheddar cheese dropped to $7.68, from $9.12 a year earlier and marking the lowest level since September 2007, the statistics agency said.

Meat, poultry and fish prices dropped 0.9 percent over the year as chicken fell 5.3 percent, processed meat slid 2.9 percent and lamb sank 5.2 percent. Beef bucked the trend, advancing 4.3 percent.

Fruit and vegetable prices increased 2 percent over the year, with continued record high prices for avocados, up 146 percent, partly offset by lower prices for tomatoes which fell 20 percent.

Restaurant meals and ready-to-eat food advanced 1.6 percent over the year.

(BusinessDesk)