Food price fall may be temporary

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FALLING PRICES: Statistics New Zealand has reported the largest annual fall in food prices since 1957.

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A record annual decline in food prices follows several years of strong price rises, and there are signs that prices could begin rising again later this year, an economist says.

The food price index rose 1.3 percent in the month of June but fell 2 percent in the year ended June, the largest annual decline since the monthly series started 50 years ago, Statistics New Zealand (SNZ) said.

Annual food price inflation peaked at 10.8 percent in September 2008, on the back of strong global commodity price growth, Goldman Sachs JBWere economist Philip Borkin said.

There has since been a significant fall in world commodity prices, but some New Zealand dollar commodity prices are starting to pick up in price.

Annual food price inflation could potentially be back above 10 percent by early 2011, Mr Borkin said.

Food prices had peaked in July 2009, having risen 16.6 percent in the two years up to that point, SNZ said.

Fruit and vegetable prices fell 9.2 percent in the past year, the largest annual fall since that series started in 1999.

The meat, poultry and fish category was down 3.9 percent for the year, and grocery food was down 1.4 percent, SNZ said.

The annual fall in grocery food prices was also the largest since the series started in 1999, and included potato crisps down 10.8 percent, but fresh milk rose 4.4 percent, cheddar cheese lifted 11.1 percent, and butter added 27.6 percent.

The food price index has taken on more significance with its release close to the Consumers Price Index, the official inflation gauge, on Friday.

However, it had not altered a forecast for a 0.4 percent increase in the June quarter CPI, and annual inflation of 1.9 percent, Mr Borkin said.

The monthly increase in food prices was slightly ahead of forecast, and followed falls of 0.7 percent in May and 0.5 percent in April.

For the month of June, fruit and vegetable prices rose 9.3 percent, with the meat, poultry and fish group up 2.7 percent.

Among individual items, tomatoes were up 44.8 percent in the month, lettuce rose 77.3 percent, and cucumber gained 79.6 percent. Porterhouse/sirloin beef steak lifted 14.3 percent, rebounding from May when extensive discounting led to a 16.2 percent fall.

Higher vegetable prices were usual in winter, and more than half the green vegetables monitored for the food price index recorded double-digit price rises in June, SNZ said

- NZPA