New Zealand food prices rose at their fastest annual pace in over three years in March, pushed higher by rising fruit and vegetable prices.
The food price index rose 0.1 percent in March, from a 0.7 percent drop in February, according to Statistics New Zealand. Prices increased 1.9 percent from the same month a year earlier, the largest annual increase since December 2011, and accelerating from a 1.5 percent increase in the year to February.
The food price index makes up nearly one fifth of the broader consumers price index, which dropped below the Reserve Bank's 1 percent to 3 percent range, rising at a 0.8 percent annual pace in 2014. Last month central bank governor Graeme Wheeler kept the official cash rate on hold at 3.5 percent, flagging any further downward surprises in New Zealand's already tepid pace of inflation may warrant an interest rate cut.
"Broader food price inflation pressures remain relatively contained," Jane Turner, senior economist at ASB Bank, said in a note. "Inflation pressures are currently very weak. As a result, we do not expect any rate hikes from the RBNZ in the foreseeable future. Indeed, the near-term risks are skewed toward a rate cut if the inflation outlook continues to disappoint."
On a monthly basis grocery foods, which make up more than a third of the measure, led the index higher, gaining 1.2 percent. In that sub-index, the price of bread and cereals increased 1.7 percent, cakes and biscuits rose 4.4 percent and yoghurt climbed 7 percent, mainly reflecting a reduction in store discounting, Statistics NZ said. Meat, poultry and fish increased 0.4 percent, while restaurant meals and ready-to-eat foods gained 0.2 percent in March from the previous month.
The monthly gain was tempered by a 3.1 percent drop across fruit and vegetables because of seasonally lower prices, while non-alcoholic beverages slipped 0.6 percent.
The annual gain was led by a 7 percent jump in fruit and vegetables. Grocery foods increased 0.5 percent, while milk, cheese and eggs climbed 1.6 percent. Meat, poultry and fish prices rose 2.5 percent, while restaurant meals and ready-to-eat foods increased 1.7 percent in the year to March. Non-alcoholic beverages edged up 0.6 percent.