Annual rise
Food prices increased 1.2% in the 12 months to October, maintaining the same increase as the 12 months to September 2024.
Higher prices for restaurant meals and ready-to-eat food as well as grocery food drove the annual increase in food prices, up 3.4% and 2.5%, respectively.
The price increase in restaurant meals and ready-to-eat food was due to rising prices for lunch/brunch, takeaway coffees, and takeaway meals.
While the slowdown in inflation for restaurant meals and ready-to-eat food has lagged grocery foods, the rate of increase does appear to be easing – albeit slowly.
Prices for restaurant and ready-to-eat meals rose up by 3.5% in the year to September.
Grocery food prices also rose on an annual basis, driven by higher prices for olive oil, butter, and standard 2 litre milk. The annual rise was 2.5%.
“A 500g block of butter now costs over one-third more than it did last year, with an average price of $6.67,” Growden said.
“The price for a standard 2 litre bottle of milk increased around 9% over the same period, averaging $4.21 a bottle.”
International dairy prices have risen in the past few months, which will be good news for farmers and the New Zealand economy as a whole, but will mean more expensive dairy products for local consumers.
BNZ economists say a record $9.75/kg milk farmgate milk price for 2024/25 could be on the cards for Fonterra’s farmers if current trends continue.
Early this week, the co-op lifted its 2024/25 milk price forecast mid-point to $9.50 from $9 previously.
Rental prices
The rate of increase in rental prices also continues to ease slowly.
The flow measure of rents – which captures rental price changes only for dwellings that have a new tenancy started in the reference month – rose just 0.1% for the month and 0.7% for the year.
The stock measure – which shows rental price changes across the whole rental population, including renters currently in tenancies – rose 0.2% for the month but was still up 4.2% across the year.
The flow tends to be more volatile than the stock measure (with a smaller sample size) but offers more insight into the future direction of rental prices.
Travel costs
Petrol prices continued to put a dent in the overall cost of living. The price did not move across the month but was down 13.9% for the year to October.
Domestic airfares were up 2.4% for the year but international prices continued to ease with fares down 2.8%.
Satish Ranchhod, Westpac senior economist, said the October prices were softer than expected.
“That was mainly due to a larger than expected fall in food prices, with falls in the prices of fresh produce, meat, groceries and beverages.”
Ranchhod said the price of takeaways and restaurant meals only rose modestly and airfares also rose less than expected.
“Those trends are consistent with the weakness we’ve seen in the hospitality sector.”
While some of the softness was in more volatile areas the October figures were consistent with a continued cooling in underlying inflation pressure, he added.
“We’re currently forecasting a 0.4% rise in consumer prices in the December quarter, and today’s results suggests some downside risk to that forecast.”
In August, the Reserve Bank (RBNZ) forecast a 0.5% rise in prices for the quarter.
Ranchhod said he expected the RBNZ to cut the Official Cash Rate by 50 basis points on November 27.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
