21 Jan 2010

Cheaper food drives down inflation

5:57 am on 21 January 2010

The consumers price index, which measures the prices that people pay for goods and services, rose by 2% last year. The increase was held down by a drop in the index in the final quarter of 2009, driven by lower food prices.

Statistics New Zealand figures show the CPI fell by 0.2% in the last three months of the year.

That decrease was mostly driven by a 2.4% drop in food costs, including a 17.6 % decrease in the price of vegetables over the three-month period. Lettuces were 63.5% cheaper and tomatoes about 32% lower in price, compared with the previous quarter.

The Statistics New Zealand figures show the cost of meat, poultry, fish and grocery foods also contributed. However this was partly offset by a 1.5% rise in transport prices, which were pushed up by international air travel.

Food prices fall 5 months in a row

In December, food prices fell for the fifth consecutive month, the first time that has happened since 1967. Prices for the month were down 0.3% on November.

The cost of meat, poultry and fish fell 1.2%, restaurant meals and ready-to-eat food prices were down 0.2%, while fruit and vegetable prices rose 1.8% in the one-month period.

One of the country's biggest supermarket companies says the declining grocery prices are encouraging its customers to buy healthier foods.

Progressive Enterprises, which owns Woolworths, Coundown and Food Town supermarkets, says the continued drop in overall food prices is leaving people with money to spend on fresh produce.

However, Craig Ebert, a senior economist for BNZ, says the trend towards lower food prices may slow as some international food prices increase.