Lower-than-expected food prices in March have prompted ASB economists to rethink their forecasts for inflation, the figures for which are due on Thursday.
Food prices fell 1% in March compared to the ASB expectation of a 0.3% rise.
ASB economist Jane Turner said food was a large part of the Consumer Price Index (CPI), the official measure of inflation, at 1.9%.
"The weaker result has nudged our CPI forecast down to 0.5% quarter-on-quarter, down from 0.6% previously."
All five food groups recorded falls over the March month.
Statistics New Zealand noted that was very unusual.
Fruit and vegetable prices fell 4.2% in the month, largely due to falls in apple prices although that was largely seasonal.
Pumpkin prices also fell sharply, and were down 57% from January's peak.
Meat prices fell 1.8%, reflecting further discounting on chicken prices. Prices for beef and lamb also fell. Ms Turner said that may reflect some of the declines seen in international prices in recent months.
Prices on grocery food fell 0.3% and Statistics NZ noted the largest contributor to this was cheaper chocolate biscuits.
Restaurant and takeaways registered a 0.2% decline.
Prices in that category were largely influenced by wage costs and falls were very unusual, she said.
"This is the second consecutive decline and is surprising given that wage inflation has picked up over the past year, albeit from very low levels."
Resulting from the food price index, ASB had dropped its annual inflation figure for March to 1.6%.
The broad-based weakness in the food price index in March highlighted the lack of inflation within the economy.
Inflation was likely to remain at the bottom of the Reserve Bank's 1% to 3% for the rest of the year, Ms Turner said.
Westpac senior economist Michael Gordon is also fore-casting a 0.5% rise for inflation but is warning that a sharp hike in tobacco excise accounted for a large share of the increase.
"Given the Reserve Bank's concerns about the strength of the New Zealand dollar, we will be paying close attention to the currency's ongoing impact on inflation."
The CPI had delivered some major surprises over the past year, overshooting forecasts in the first half of 2011 then undershooting at least as much in the second half, he said.
"We should note there are a number of known unknowns - identifiable risks around our forecast - for the March quarter."
At a glance
• Food prices fall 1% in March
• Fruit and vegetable prices main contributor to fall
• Inflation for March quarter likely to be 1.6%Tobacco excise tax and petrol main contributors to inflation
