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The dip in food prices in December was in line with expectations and added to recent indicators pointing to a benign inflation environment, ASB economist Christina Leung said yesterday.
She expected the release of fourth-quarter consumer price index (CPI) figures, due next week, to show a 0.1% fall in overall consumer prices for the three months ended December. That was only a ''touch'' different from the Reserve Bank's forecast of a 0.2% fall. Food prices make up almost 19% of the CPI.
Statistics New Zealand said food prices fell for a third month due to cheaper vegetables which were in season, although more expensive milk pushed prices up for the year. On an annual basis, food prices were up 1.5%, from a 1.4% annual increase in November.
The monthly decline was led by a 3.7% fall in the price of vegetables, with cheaper lettuces, broccoli and cabbages, and were down 1.3% on the year.
Fresh milk prices rose 2.7% in December, and were up 9.4% on the year. More expensive dairy products were the main driver of the annual increase in food prices, with yoghurt up 10%, cheese up 7.7% and other milk products up 10%.
Ms Leung said the fall in fruit and vegetable prices was led by seasonally lower prices for tomatoes and nectarines.
''This likely reflects relatively favourable weather conditions over the early part of summer.''
The increase in meat prices in December was largely due to less discounting of chicken. In contrast, Statistics NZ reported increased discounting for beef. Global beef prices had fallen in New Zealand dollar terms over the last part of 2013 and that was starting to flow through to lower beef prices at the retail level.
''With inflation pressures remaining contained for now, we expect the Reserve Bank will wait until March to life the official cash rate,'' Ms Leung said.