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Deutsche Bank - NZ Food Price Index - October 1999

Deutsche Bank - NZ Food Price Index - October 1999

Data Flash (New Zealand)
NZ Food Price Index - October 1999

Key Points

The food price index (FPI) comprises 18% of the CPI regimen and is very volatile on a monthly basis. The food price index fell 0.6% mom in October, following a 0.3% mom increase in September. Food prices are now 1.2% lower than they were in October 1998.

The most significant contribution to the decrease in the October index came from the fruit & vegetable subgroup (-4.6%). Other subgroups contributing to the decline included meat fish & poultry (- 0.4%) and grocery foods::::: (-0.1%). Food prices excluding the volatile fresh fruit and vegetable components were flat for the month (+0.5% yoy).

:::::::::::::::Food Price:::::::::::::Fruit &
::::::::::::::: Index::::::::::::::: Vegetable
::::::::::::::::::::::::::::::::::::::::Index
:::::::::: mom. %:::::ann. %::::: mom. %:::::ann. %

May-99::::: -0.4::::: 2.4::::: -1.3::::: 6.3

Jun-99::::: -0.7::::: 1.4::::: -6.3::::: 0.4

Jul-66::::: 0.5::::: 1.1::::: -1.8::::: -7.3 Aug-99::::: -0.6::::: -0.6::::: -3.0::::: -11.0

Sep-99::::: 0.3::::: -0.3::::: -1.4::::: -11.2

Oct-99::::: -0.6::::: -1.2::::: -6.6::::: -15.9

Source: DB Global Markets Research, Statistics NZ

Comment

The 0.6% mom decline in food prices in October was considerably below market expectations for a 0.4% mom increase. However, the movements in a number of food prices are very volatile on a monthly basis, largely reflecting the availability of fruit & vegetables and grocery items moving on and off "special". Despite the weaker than expected food price outturn for October, we expect CPI inflation to pick-up sharply over the December 1999 and March 2000 quarters. This spike in the CPI is projected to reflect the impact of recent petrol price increases and local authority rates, together with a rise in car prices on the back of a weaker cross rate against the Yen.:::::Our initial forecasts suggest a 1.0% qoq rise in CPI during the December quarter, taking the annual rate up to 2.3%, followed by a 0.6% increase in Q1/2000, which will take the annual increase to 2.7%.

ENDS

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