Food price inflation should slow sharply later this year according to some experts. Photo / NZME
Food price inflation should slow sharply later this year according to some experts. Photo / NZME
Food prices are expected to rise at a slower rate in the second half but a difficult year lies ahead for consumers, an economist says.
Stats NZ recorded a jump of 12.1 per cent for food prices year on year to March - the highest increase in more than 30years.
Grocery prices rose 13.7 per cent over the year with Kiwis forking out more for eggs, potato chips and six-packs of yoghurt while fruit and vegetable prices were up 22.2 per cent.
ASB senior economist Mark Smith said while food price inflation should cool throughout the year, a difficult year lies ahead for consumers.
“We’re currently seeing exceptionally high prices,” Smith said.
He said food prices overseas were coming down, which should lead to a “sharp slowdown” in food price inflation for Kiwis in the second half of the year.
“The drop in global food prices look like they’re filtering through already,” Smith said.
Meat, poultry, and fish prices were down 1 per cent between February and March although they were up 7.8 per cent year on year.
He said this drop was “major good news”, showing some signs of the global shift in food prices reaching the local market.
Kiwis were “likely to see a sizeable drop in food price inflation” later this year, he said.
“We could well see annual food priceshead higher but expect inflation to fall to around 6 per cent by end of the year and lower after that,” Smith said.
“We’re looking at 5 per cent inflation by end of the year, largely led by lower global food commodity prices,” he said.
Smith said fruit and vegetable prices climbed 0.5 per cent from February to March - a more moderate rise than expected and were down 0.5 per cent after seasonal adjustment.
“There were fewer than expected signs of an immediate cyclone-induced boost to fruit and vegetable prices.
“What’s of more concern is grocery food prices accelerating on annual prices with a chunky monthly increase,” he said.
Grocery food prices saw the steepest hike from February to March, up 2.3 per cent or 2.1 per cent after seasonal adjustment.
Smith said grocery foods like oil and grains went up across the board, driving the majority of food price increases.
Inflation was coming largely from the higher costs hitting supermarkets, he said.
“In the current environment, it’s easier [for food retailers] to pass those on to customers than to absorb costs,” Smith said.
He said prices were going up across all grocery items with consumers less resistant to rises.
Price of tomatoes at a grocery store in Rotorua. Photo / NZME
“There’s less consumer resistance to paying high prices than a few years ago,” Smith said.
He said more than half of inflation in this year’s first quarter would come from food and housing inflation.
Food prices rose 0.8 per cent in March but were down 0.5 per cent when seasonally adjusted.
Auckland Action Against Poverty’s Brooke Fiafia said the team was being “swamped” with emails and walk-ins with more and more Aucklanders struggling to afford the basics.
Westpac economist Satish Ranchhod said the rise in food prices was significant but there was a bigger issue in the “strength of demand”.
He said that with high demand and a shortage in skilled labour, fruit and vegetable producers were struggling to get their products on shelves.
“Capacity pressures in the economy are stretched in the labour market. This is pushing up offloading costs in primary industry,” Ranchhod said.
Fiafia said prices across the board were increasing while wages and benefits were stagnant.
“There’s nothing to meet the price increase. It’s across power, water, rent, petrol,” she said.
She said the cost of living crisis was “exacerbating the issues we’ve already known about in our communities”, especially for families impacted by flooding earlier this year.
“They’re going into debt with Work and Income so they have everything to rebuild,” Fiafia said.
Fiafia said the cost of living crisis was causing a major disruption for Government agencies.
She said Māngere’s Work and Income office was “always packed” when they visited.
Restaurant meals and ready-to-eat food prices increased by 8.7 per cent over the year, according to Stats NZ, while non-alcoholic beverage prices were up 8.2 per cent.
The latest data from Stats NZ arrived after months of punishing price increases and numerous problems for some producers including labour shortages, supply chain logjams and the devastating summer floods and cyclones.
Last month, Canstar research found the cost of paying for groceries had surpassed the cost of housing as the biggest financial worry for Kiwis.
Meanwhile, CMC Markets today announced a partnership with food rescue charity KiwiHarvest to support what it called “the hunger and food waste crises”.
CMC said it would provide $10,000 a year to help KiwiHarvest prevent edible food from ending up in landfill, and address surging demand for food support in vulnerable communities.
