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April rise in grocery prices warns of inflation threat

Thursday 12th May 2011

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A 1% rise in grocery food prices in April is being seen as an ominous portent of inflation to come.

Figures from Statistics New Zealand (SNZ) today show that overall food prices lifted just 0.1% last month, although for the year to April they were up 6.1%, the fastest annual rise since July 2009.

But ASB economist Christina Leung said the subdued food prices in April were largely due to a 3.3% fall in fruit and vegetable prices, which were typically weak in April.

In contrast, the rise in grocery prices probably reflected a surge in international soft commodity prices in recent months, which were flowing through to higher prices for bread, pasts, some dairy products and cooking oil, she said

"Over the past year, food price inflation has picked up with annual growth of 3.9%, excluding the effects of the GST increase last year.

"While this is well below the double digit growth seen in late 2008, the growing momentum in price growth of groceries, restaurant & takeaways suggests food prices (are) likely to become a key inflation story over the coming year."

In April non-alcoholic beverages were up 1.7%, while meat, poultry and fish prices dropped 0.5%.

Soft drinks lifted 1.8% in the month, margarine gained 12.8%, bread added 2.1%, and sausages were up 5.2%.

Lettuce prices fell 15.8%, and kiwifruit was down 27.4%, while a 5.5% drop in porterhouse/sirloin beef steak and 13.5% fall in canned soup reflected a rise in the level of discounting, SNZ said.

The 6.1% annual rise included a 2.2% lift in food prices resulting from the increase in GST last October.

Grocery food prices were up 5.8% over the year, fruit and vegetables lifted 8.7%, the meat, poultry and fish group lifted 6%, restaurant meals and ready-to-eat food lifted 4.6%, and non-alcoholic beverages rose 7.6%.

Fresh milk was up 9.3% over the year, soft drinks lifted 6.1%, potatoes rose 30.9%, lettuce was up 47.8%, and lamb chops added 23.3%. Bananas fell 6.2% and bacon dropped 4%.



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