Food prices rose 4.7% in September from the same month a year ago, the lowest annual rise for any month since a 3.8% rise in January, figures released by Statistics New Zealand show.
The rise included an estimated 2.2% general price rise due to the increase in GST on October 1 last year, Stats NZ said. September is the last month in which the GST hike will show through in the annual figures, as prices in October will be compared with the same month last year when GST was hiked.
The recent peak in annual price rises was 7.9% in July, before falling to 6.6% in August and the 4.7% rise in September. Annual rises had been over 10% in 2008, before falling in 2009 and the first half of 2010.
The downward trend - over the last three months before the GST increase goes out of the annual figures - should be welcome news to Reserve Bank Governor Alan Bollard, who is charged with keeping general inflation within a 1-3% band over the medium term. The Reserve Bank is allowed to look through one-off price spikes caused by a rise in government taxes like GST and the Emissions Trading Scheme.
In its September quarter Monetary Policy Statement, the Reserve Bank forecast March year inflation would drop from 4.5% in 2011 (which included the GST impact) to 2.1% in 2012, 2% in 2013, and 2.2% in 2014 - well within its target band.
'OCR on hold til March'
ASB economist Christina Leung said the figures hinted at a moderation in food price inflation.
"Overall, it adds at the margin to recent inflation indicators which suggest the RBNZ has some breathing space on the inflation front for now. With the volatility in global market dominating the RBNZ’s attention for now, we continue to expect the RBNZ will leave the OCR on hold until March next year," Leung said.
Vege prices fall
Monthly figures showed food prices fell 1% in September from August due to a fall in vegetable prices, Stats NZ said.
The largest downward contributions came from seasonally lower prices for lettuce (down 33 percent) and tomatoes (down 27 percent). Prices for most green vegetables fell, which is usual for this time of year. If vegetable prices had remained unchanged, the food price index would have shown a rise of 0.3 percent, Stats NZ said.
"Banana prices (up 24 percent) bounced back in September after slipping 21 percent in August. A temporary increase in banana imports caused prices to fall in August to their lowest level in five years," Statistics NZ prices manager Chris Pike said.
Grocery food prices fell 0.2 percent in September 2011. This is the second consecutive monthly fall in grocery food prices. This included a price fall for bread (down 1.1 percent), which was the third monthly fall in a row. Bread prices are now back to levels last seen in March of this year, Stats NZ said.
All subgroups had price increases in the year to September 2011: grocery food (up 4.8 percent), meat, poultry, and fish (up 6.3 percent), restaurant meals and ready-to-eat food (up 4.4 percent), non-alcoholic beverages (up 7.2 percent), and fruit and vegetables (up 0.9 percent).