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NZ food prices rose 0.5 percent in July, led by more expensive veges; fastest annual pace since Feb 2012

Monday 12th August 2013

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New Zealand food prices rose for a fourth month in July, led by more expensive vegetables in the middle of winter, and increased at their fastest annual pace since February last year.

The food price index increased 0.5 percent in July, adding to the 2.1 percent gain in June, and is up 0.9 percent from the same time a year earlier, according to Statistics New Zealand. That's the fastest annual gain since a 1.5 percent increase in 17 months, over a period where food prices have fallen on an annual basis in 11 of those months.

A 6.6 percent increase in the price of vegetables led food prices higher, with more expensive lettuce and broccoli, and grocery food prices rose 0.5 percent on dearer museli bars and cheese. Fresh milk prices fell 0.6 percent in July and preserved milk prices dropped 3.3 percent, while the price of cheese increase 4.8 percent.

"Over 2012 and the first half of 2013, food price declines were a contributing factor toward the weakness in headline inflation," ASB economist Jane Turner said in a note. "These trends are now reversing, with meat and dairy prices likely to remain elevated or increase over the coming year reflecting developments in global markets."

Food prices account for about 19 percent of the Consumers Price Index, which showed an annual pace of inflation of 0.7 percent, the slowest pace since 1999.

The country's tepid pace of inflation has let the Reserve Bank keep interest rates at record low levels as the regulator seeks to stimulate the economic recovery, while preventing a heating property market from spilling over into wider consumer spending.

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