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Deutsche Bank: NZ Food Price Index - Nov 1999

Data Flash (New Zealand)
NZ Food Price Index
Food Price Index:::::

Food Price Index Fruit & Vegetable

::::::::::mom. % ann. % mom. %::::: ann. %

Jun- 99 -0.7::::: 1.4::::: -6.3::::::::::0.4
Jul- 99 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
Nov-99:::::::::: +0.5::::: -0.3::::::::::-::::: -13.8

Source: DB Global Markets Research, Statistics NZ

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 rose 0.5% mom in November, following a 0.6% mom decline in October. Food prices are now 0.3% lower than they were in November 1998.

The most significant contribution to the increase in the November index came from the grocery foods, soft drink & confectionery (+0.7%) and meat fish & poultry subgroups (+1.5%). Somewhat offsetting these increases, the fruit & vegetable subgroup (-0.1%) made the only downward contribution to aggregate food prices - the decline in this group largely reflects favourable climatic conditions. Food prices excluding the volatile fresh fruit and vegetable components rose +0.6% for the month (+1.3% yoy).


The 0.5% mom increase in food prices in November was in line with average market expectations. Despite the reasonably subdued state of food price inflation, a number of largely transitory factors (local authority rates, car and petrol prices) suggests a sharp pick- up in CPI inflation over the December quarter - we expect Q4 CPI of +0.9% qoq/+2.0% yoy.

In spite of a projected upturn in CPI inflation over the first half of 2000, we do not assume a cash rate rise to occur at the interim assessment date of 19 January, but instead expect a +50 bp move at the 15 March MPS. Nevertheless, the Bank may consider a January move if the NZD has a disappointing start to the new year, suggesting that interest rates will need to play a more significant part in the tightening process.


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