Food inflation lowest in more than five years

Food inflation has eased to its lowest level in more than five years.

Stats NZ said food prices fell 0.2 percent in May on the month before, to be 0.2 percent higher than a year ago, the lowest annual increase since September 2018.

Consumer prices manager James Mitchell said the slowdown in food inflation was driven by cheaper fruit and vegetables, but there were other contributions.

“Prices for meat, poultry, and fish recorded an annual decrease for the first time in over three years.”

“Of all the items in the food basket, cheaper cheese prices had the largest impact on overall food prices,” Mitchell said, adding a 1 kilo block had fallen to $10.02 in May this year from $13.60 a year ago.

More than half the food items tracked in the food index fell in price in May.

However, eating out, takeaways, and soft drinks were all more expensive.

Food prices make up just under 19 percent of the main inflation barometer, the consumer price index (CPI).

The monthly price movements of other goods and services were mixed.

Fuel prices were lower reflecting cheaper global prices and some strength in the New Zealand dollar, with airfares and accommodation also cheaper.

However, rents, which were the second biggest item in the CPI, edged up to be 4.6 percent higher than a year ago.

The selected prices reports make up just under half of the CPI.

ANZ economist Henry Russell said the price rises were softer than expected, but covered products and services that were more volatile.

“However, weakness stems from volatile components and there remains a risk of payback next month.”

He was still forecasting a 0.6 percent June quarterly rise, with an annual rate falling to 3.5 percent, but said there was now an increased prospect of a lower number.

Russell said the numbers were not likely to shift Reserve Bank interest rate thinking, which was still thinking about sticky domestic pressures, and other factors.

“Activity and labour market developments are likely to be more important for the RBNZ’s medium term inflation outlook, than near-term noise.”