NZ food prices post biggest monthly gain in three years, eases pressure on RBNZ

Food prices in New Zealand posted the biggest monthly gain in three years, easing rate cut pressure on the Reserve Bank of New Zealand. The country’s food prices constitute around 19 percent of the consumer price index basket; a rise in food prices would in turn, raise the CPI index, thus easing pressure on the central bank to reduce interest rates.

Fruit and vegetable prices spurred the increase by climbing 5.8 percent on month. Banana prices spiked 22 percent from July to NZD3.51 per kilo. The previous peak was NZD3.23 in March this year, data released by Statistics New Zealand showed Tuesday.

Further, prices for grocery foods rose 0.7 percent, with higher prices for snack foods, cheese, and confectionery products. Cheese prices have rebounded with a 3.0 percent rise following a consistent drop in prices over the last three months.

Also, chicken prices fell 4.6 percent in August to their lowest level since August 2007. The average price for a kilo of chicken breast was NZD14.12 compared with NZD14.44 per kilo in July and NZD15.73 a year ago. Non-alcoholic beverage prices gained 1.8 percent, while restaurant meals and ready-to-eat food prices picked up 0.3 percent.

Moreover, on a yearly basis, food prices picked up 0.5 percent. Meat, poultry, and fish prices fell 0.2 percent on year, while grocery food prices shed 0.5 percent and non-alcoholic beverage prices were flat. Fruit and vegetable prices rose 1.7 percent, while restaurant meals and ready-to-eat food prices gained 2.0 percent.

Construction is likely to have added the most to the second quarter growth again; however, gains are expected to be quite widespread throughout sectors. Construction is expected to have grown 4.1 percent in the second quarter. The agricultural sector seems to have performed better in the June quarter as meat and milk production recovered following a weaker starter to 2016 due to weather-related concerns.

Meanwhile, the yield on the benchmark 10-year bond, which moves inversely to its price, rose 1/2 basis point to 2.485 percent, the yield on 7-year note also ended 1/2 basis point higher at 2.160 percent and the yield on short-term 2-year note climbed 1/2 basis point to 1.960 percent. New Zealand’s benchmark S&P/NZX50 Index closed down 30.52 points to 7,249.24.