Spring is in the air and so are lower lettuce and tomato prices as fresh supplies hit the market in October. A halving of lettuce prices and a 24.9% drop in tomato prices were major factors in food prices falling 0.3% in October from September, which was the first monthly fall in food prices since August last year and the biggest monthly fall since December 2006. However, food price inflation in October from a year ago was still high at 9.9%, although down from the 10.8% annual inflation seen in September. This is the first sign of the lower inflation that some economists are talking about for late 2008 as sharply lower fuel prices and the effects of the recession take some of the heat out of inflation. This would leave room for the Reserve Bank to cut the Official Cash Rate aggressively again on December 4. Many economists are now picking a 100 basis point cut to 5.5% on December 4. Here's more details from the Statistics NZ release below.
Food prices fell 0.3 percent in October 2008, following increases of 0.6 percent and 2.7 percent in September and August 2008, respectively. In October 2008, lower prices were recorded for the following subgroups: fruit and vegetables (down 6.0 percent), and non-alcoholic beverages (down 0.4 percent). Higher prices were recorded for the meat, poultry and fish (up 2.4 percent), grocery food (up 0.6 percent), and restaurant meals and ready-to-eat food (up 0.3 percent) subgroups. The most significant individual downward contributions came from lower prices for lettuce (down 50.7 percent), and tomatoes (down 24.9 percent). The most significant individual upward contributions came from higher prices for potatoes (up 20.6 percent), beef (up 5.4 percent), and prepared meats and smallgoods (up 6.0 percent). percent), beef (up 5.4 percent), and prepared meats and smallgoods (up 6.0 percent).