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There has been an increase of 2.1% for food prices in the January 2010 month, after five months in decline, Statistics New Zealand said today. Prices are up 2.2% from a year ago. (Update 1 includes chart. Update 2 includes economist reaction.)

Significant contributions to the rise in food prices came from higher prices in grocery food, fruit and vegetables, meat, poultry and fish, Stats NZ said. Tomato prices rose 22%, chicken meat prices rose 7.8% and milk prices rose 5.1%, while restaurant meal prices rose just 0.3%.

See the full release below:

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By Roger J Kerr

It never ceases to amaze me that bank economists in New Zealand today continue to prattle on about the inflation risks stemming from retail spending activity as if there is an automatic correlation and direct cause/effect relationship from consumer spending to inflation.

They do not seem to care about the irrefutable evidence over the last seven years in the New Zealand economy that strong consumer demand has not led to the inflation we have experienced.

Never let the facts get in the way of the purist economic theory, which supposedly gets the bank’s name in the business media as some kind of authority on inflation and thus the timing of the next OCR change. (more…)

Prices, as measured by the Consumers Price Index (CPI), fell 0.2% in the December quarter from September, figures released by Statistics New Zealand show. The drop was in line with the Reserve Bank of New Zealand’s forecast and is likely to reinforce the central bank’s view that it can keep the Official Cash Rate on hold at 2.5% until ‘around the middle’ of 2010.

(Update 1 includes Stats NZ comments. Update 2 includes further Stats NZ comments on trimmed mean measures showing underlying price change “quite flat” over December quarter. Update 3 adds economist comments. Update 4 tracks NZ$.)

Economist predictions had centred around a flat CPI during the December quarter, and ranged from of a 0.3% fall to a 0.3% rise. Stats NZ said its trimmed mean measures, which exclude extreme price increases and decreases, recorded quarterly movements ranging from no change to 0.1%. “This indicates that underlying price change for the quarter was quite flat,” Stats NZ said.

The CPI rose 1.3% in the September quarter, 0.6% in June and 0.3% in March. The New Zealand dollar initially fell by around 0.4 USc on the news to 73.5 US cents. Just after midday, the NZ dollar had fallen almost 0.75 USc to 73.25 USc.
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By Roger J Kerr

This Wednesday’s inflation data for the December quarter will be a timely reminder to all and sundry that you do not see much in the way of upwards price pressures coming out of the back-end of an economic recession. Which industries or sectors are in a position to push up prices in an environment of flat and subdued economic demand and get away with it?

They might try, but suffer decreased sales as discerning buyers look for cheaper alternatives.

A number of factors are playing into the low inflation outcome, falling fruit/vegetable prices and the higher NZD allowing for massive discounting on imported consumer goods.

Thankfully we are no longer seeing the usual increases in electricity and local body rates. (more…)

By Roger J Kerr

As we enter the New Year there are wildly divergent views on how the NZ economy will perform this year, therefore marked differences in view as to the timing of interest rate increases from the current loose monetary settings of a 2.5% OCR.

Over the next two months I would not expect the short-term interest rate market to move away from their current forward 90-day market pricing of 0.50% lift by March and 2.00% to 4.50% by December.

However that does not mean that the RBNZ will deliver to current market timing/amount expectations.

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Prices rose by 1.3% in the September quarter, the latest Consumer Price Index (CPI) figures showed. The rise was more than the 1.1% 0.8% rise the market was expecting and will encourage those picking that the Reserve Bank of New Zealand will hike the Official Cash Rate earlier than the latter part of 2010, as it has previously indicated.

(Update 4 includes Westpac economist comment.)

Annual CPI inflation was 1.7% in the September quarter, above the 1.1% the market was expecting. The annual increase was the lowest in five and a half years, Statistics New Zealand said.

The 1.3% quarterly increase followed a 0.6% increase in the June quarter, a 0.3% increase in March and a 0.5% fall in the December quarter last year. In September 2008 quarterly inflation was 1.5% while annual inflation was 5.1%.

The higher than expected CPI figures spurred the New Zealand dollar, which rose by around half a US cent on the news.

Here are Stats NZ’s comments on the figures:

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