Food prices down but expect rises again soon

Food prices are falling but the weekly shop is higher than two years ago. Photo / Dean Purcell

Food prices have fallen for the fifth month in a row - a trend not seen in 42 years.

However, the decline is from some of the highest prices in New Zealand in 20 years - and the weekly shop is still about 10 per cent higher than two years ago.

The monthly drops are an encouraging sign but the Food Price Index, released by Statistics New Zealand yesterday, shows prices still increased by 0.9 per cent during 2009.

And experts say any relief - particularly in dairy food prices - will be short-lived.

Key food price increases in the past year include: tomatoes (up 68.9 per cent), lettuce (up 26.4 per cent) and soft drinks (up 9.5 per cent).

Major price decreases include: butter (down 28.5 per cent) cheddar cheese (down 15.9 per cent), milk (down 3.8 per cent), chicken (down 8.5 per cent), fruit (down 7.9 per cent), apples (down 25.8 per cent) and carrots (down 23.6 per cent).

Many of the drops, such as dairy food prices, are merely a fall back from sharp increases during the recession which were attributed to factors including higher fuel and grain costs.

Statistics New Zealand price manager Chris Pike said the low annual increase of 0.9 per cent came after annual highs, which peaked at 10.8 per cent in September 2008 and had decreased since.

The last time annual rises were at such high levels was in April 1990 when they reached 11.4 per cent.

Although consumers were enjoying decreases to dairy product prices, they were expected to rise again.

"We'll have to see what pans out but certainly there have been reports of possible increases in retail dairy prices because world prices have recovered."

His view was backed by Shamubeel Eaqub, principal economist for the New Zealand Institute of Economic Research, who said five consecutive months of food price decreases reflected international economic recovery following the global financial crisis - the impact of which usually took about nine months to be felt in New Zealand.

Mr Eaqub expected another two or three months of "fairly modest" food price declines.

"We expect food prices to keep falling, on average, through the early part of this year [but] by the middle of this year we'd expect to see food prices starting to trend upwards again. By the middle of the year prices may be 3 to 4 per cent higher than a year earlier."

New Zealand Federation of Budgeting Services chief executive, Raewyn Fox, said by the time families in need noticed any price drops, prices would be on the rise again. "It takes a while for the effects to both hit people and benefit people."

She was concerned that when families noticed food prices rise it would be winter, when power prices would also have increased, leaving some families even more desperate.

CHECKOUT

Prices year to Dec 2009

Up:

* Non-alcoholic drinks+6.6 per cent
* Restaurant and ready-to-eat food+2.8 per cent

Grocery food+0.3 per cent

Down:

* Meat, poultry and fish-0.9 per cent
* Fruit and vegetables-2.1 per cent

Total:+0.9 per cent