Ranchhod said food price rises should be more moderate moving through the year as supply disruptions ease.
At 0.3 per cent, the monthly increase was the lowest recorded since April 2022.
Fruit and vegetable prices saw the biggest increase in the last year, up 18.4 per cent, with grocery food prices up 12.7 per cent on last May.
But on a monthly basis, fruit and vegetable prices dropped 2.9 per cent in May (down 2.5 per cent after seasonal adjustment) compared to April.
“There was some good news,” Smith said, as fruit and vegetable prices eased particularly for kiwifruit and green vegetables.
He said lower prices for bread and cereals were mostly offset by higher prices for milk, cheese and eggs, while restaurant meals and ready-to-eat food price rises are likely linked to rising wage costs.
“Pricing pressures in the grocery foods sector look to be easing, and price rises look to be less widespread,” Smith said.
He said, “Lower food commodity prices point to an eventual easing in retail food prices but sub 3 per cent annual food price inflation still looks a long way off.”
Ranchhod said fruit and vegetable price hikes were partly due to supply disruptions after severe weather events in January and February which he said are beginning to ease.
He said, “A full recovery from those devastating events will take an extended period.
“For now, consumers are likely to remain under the pump given elevated living cost increases. Our expectation is that the household sector will retrench on a per-capita basis over 2023, with the weakness in household spending volumes masked by strong population growth,” Smith said.
Smith said the price rises were not widespread: “About 56 per cent of items rose in May. More falls were evident with 42 per cent of items seeing a fall in food prices.”
Ranchhod said: “We’ve already started to see some moderation in production costs in the agricultural sector like fertiliser and fuel prices. Similarly, global transport costs have been softening after they spiked during the early stages of the pandemic. Even so, food price inflation is likely to remain strong for some time yet.”
He said households are under more pressure from increasing food prices: “Many households have been rolling off the low mortgage rates that were on offer during the pandemic and on to much higher rates.”
He said the impact is “already draining a large amount out of many households’ wallets and around 25 per cent of borrowers still face resetting their mortgages over the coming year”.
Consumer prices manager James Mitchell said grocery foods drove a majority of the yearly price increase: “Increasing prices for fresh eggs, potato chips, and lollies were the largest drivers within grocery food.”
The second-largest driver of yearly food price growth was fruit and vegetables, specifically for avocados, kūmara, potatoes and tomatoes.
Today’s annual food price number follows increases of 12.5 per cent for the year to April 2023, 12.1 per cent to March and 12 per cent to February.
Monthly grocery food prices also fell 0.1 per cent. Meat, poultry, and fish prices were up 1.4 per cent on April, non-alcoholic beverage prices rose 4.5 per cent, while restaurant meals and ready-to-eat food prices were up 0.8 per cent.
Mitchell said non-alcoholic beverages drove price increases from April to May: “Prices for non-alcoholic beverages such as soft drinks, energy drinks, and bottled water increased 4.5 per cent in May, contributing the most to the overall monthly rise.
“Decreasing prices for fruit and vegetables such as tomatoes, mandarins and kiwifruit mostly offset the non-alcoholic beverages movement.”
Alka Prasad is an Auckland-based junior business reporter covering small business and retail. She joined the Herald in 2022 following Te Rito cadetship programme.
