Data Flash (New Zealand)
The food price index rose by 0.3%mom - the market had expected an increase of 0.1% mom.
As a result, the annual rate of food price inflation rose to 6.2% - the highest rate recorded since June 1990.
The higher than expected result occurred despite a 6.8% mom decline in the volatile fruit and vegetable component
(driven by sharply lower prices for fresh vegetables, in particular).
General grocery prices rose 1.6% mom, taking the annual rate of grocery price inflation to 4% (the highest rate since
A 5.6% rise in milk prices made the most significant contribution to the rise in general grocery prices, while many
other dairy-related products also increased in price. These increases reflect buoyant world prices for dairy produce and
the weak NZD. A range of other grocery items also increased in price (eg potato crisps and softdrinks). Promotional
activity did not appear to have a strong influence on grocery prices this month, suggesting that the result was driven
by genuine price rises.
Meat prices rose a further 1.8% to 11.2% higher than a year earlier, again reflecting buoyant commodity prices and the
Prices in the restaurant and takeaway sub-group rose 0.7% mom in May, taking the annual rate of inflation in this
subgroup to a 10 year high of 3.8%. The Food Price Index makes up 18% of the CPI regimen.
Our preliminary forecast for the Q2 CPI is 0.9% qoq (the RBNZ also forecast 0.9% qoq in its May Monetary Policy
Statement). This result would see the annual rate rise from 3.1% to 3.3%.
However, at present our estimate is subject to a greater than usual degree of risk, due to the still uncertain impact on
measured airfares of the collapse of Qantas New Zealand in late April. Although Freedom and Qantas have introduced
highly publicised special low fares on some routes, anecdotal evidence suggests that the average airfare faced by many
travellers (especially those travelling on short notice) may, in fact, have risen somewhat during Q2.