New Zealand food prices rose in April, snapping two declines, as eggs and dairy products lifted grocery bills in the month, though inflation remained contained as the strong kiwi dollar kept a lid on imported prices.
The food price index advanced 0.6 percent in April following a 0.3 percent fall in March, according to Statistics New Zealand. Food prices increased 1.5 percent on an annual basis, accelerating from the 1.2 percent pace in March with all five components of the index rising in the year.
The monthly gain was led by a 1 percent gain in grocery food prices, as milk, cheese and eggs gained 1.4 percent, while bread and cereals rose 1 percent as did confectionary, nuts and snacks. On an annual basis, grocery prices rose 1 percent with milk, cheese and eggs making the biggest contribution, up 6.7 percent on a 28 percent lift in the price of butter.
The Reserve Bank is watching the pace of rising consumer prices, of which food prices contribute almost 19 percent, having flagged increased price pressures as a reason behind its shift to tighter monetary policy this year. Governor Graeme Wheeler has hiked interest rates 50 basis points since March in a bid to curb inflation, although April's first quarter consumers price index showed a slower-than-expected pace of inflation.
"The low level of food price inflation, along with the effects of the high New Zealand dollar on other areas of tradable inflation, are contributing to the overall contained inflation environment," Christina Leung, an ASB economist said in a note. "We expect rising inflation pressures will become more apparent later next year when the dampening influence of the high New Zealand dollar lessens, and economic activity ramps up and underpins a lift in underlying inflation."
