New Zealand food prices rose at their fastest annual pace in over three years in March, pushed higher by rising fruit and vegetable prices.
The food price index rose 0.1 per cent in March, from a 0.7 per cent drop in February, according to Statistics New Zealand. Prices increased 1.9 per cent from the same month a year earlier, the largest annual increase since December 2011, and accelerating from a 1.5 per cent increase in the year to February.
The food price index makes up nearly one fifth of the broader consumers price index, which dropped below the Reserve Bank's 1 per cent to 3 per cent range, rising at a 0.8 per cent annual pace in 2014. Last month central bank governor Graeme Wheeler kept the official cash rate on hold at 3.5 per cent, flagging any further downward surprises in New Zealand's already tepid pace of inflation may warrant an interest rate cut.
"Broader food price inflation pressures remain relatively contained," Jane Turner, senior economist at ASB Bank, said in a note. "Inflation pressures are currently very weak. As a result, we do not expect any rate hikes from the RBNZ in the foreseeable future. Indeed, the near-term risks are skewed toward a rate cut if the inflation outlook continues to disappoint."
On a monthly basis grocery foods, which make up more than a third of the measure, led the index higher, gaining 1.2 per cent. In that sub-index, the price of bread and cereals increased 1.7 per cent, cakes and biscuits rose 4.4 per cent and yoghurt climbed 7 per cent, mainly reflecting a reduction in store discounting, Statistics NZ said. Meat, poultry and fish increased 0.4 per cent, while restaurant meals and ready-to-eat foods gained 0.2 per cent in March from the previous month.
The monthly gain was tempered by a 3.1 per cent drop across fruit and vegetables because of seasonally lower prices, while non-alcoholic beverages slipped 0.6 per cent.
The annual gain was led by a 7 per cent jump in fruit and vegetables. Grocery foods increased 0.5 per cent, while milk, cheese and eggs climbed 1.6 per cent. Meat, poultry and fish prices rose 2.5 per cent, while restaurant meals and ready-to-eat foods increased 1.7 per cent in the year to March. Non-alcoholic beverages edged up 0.6 per cent.