Food prices rise in April - global chocolate and olive oil shocks lead the spike

Both cocoa bean and olive oil prices spiked around the world in the last few months with extreme weather events causing bad harvests in Africa and southern Europe respectively. Photo / 123RF

Monthly food prices rose 0.6 per cent in April 2024 compared with March 2024, according to figures released by Stats NZ today.

It was the first food price index rise in three months. The largest contributing group to the monthly rise was grocery food, driven by higher prices for potato crisps, chocolate blocks, and olive oil.

Both cocoa bean and olive oil prices spiked around the world in the last few months with extreme weather events causing bad harvests in Africa and southern Europe respectively.

The fruit and vegetables slightly offset the increase, with cheaper prices for kiwifruit, broccoli, and mandarins.

“Stocking up with fruit and vegetables became cheaper for the third consecutive month,” consumer prices manager James Mitchell said.

“At the same time, filling up the fridge and pantry with other food items, and heading out to a cafe or restaurant became more expensive.”

Food prices increased 0.8 per cent in the 12 months to April 2024.

The latest increase followed a 0.7 per cent increase in the 12 months to March 2024. At the same time last year food prices increased 12.5 per cent.

The smaller increase compared with last year was due to cheaper fruit and vegetables, down 13 per cent in the 12 months to April 2024, while all other broad food groups increased in price.

“The fall in fruit and vegetable prices, compared with April 2023, reflects prices coming down from highs seen throughout 2023,” Mitchell said.

“Tomato prices were more typical for April – about $3.50 cheaper per kilo than what they were this time last year, while kūmara prices have more than halved since the start of 2024,” Mitchell said.

International airfares

Meanwhile, the monthly Selected Price Index showed a big spike in international airfares during March.

The index is a composite of food, travel and accommodation prices. It equates to 45 per cent of the Consumers Price Index inflation rate - which is released every three months.

Prices for international air transport rose 7.2 per cent in April 2024 compared with March 2024, while prices for overseas accommodation were down 4.9 per cent.

“Kiwis travelling overseas in April would have experienced higher airfares than those who travelled in March,” said Mitchell.

“On the flip side, the prices for their accommodation were cheaper.”

International air transport prices were 47.7 per cent more expensive than five years ago, in April 2019, while prices for overseas accommodation were 30.8 per cent more expensive over the same time.

Rents

The Selected Price Index also showed that rents continue to rise. The stock measure of rental property rose 0.5 per cent for the month and 4.6 per cent for the 12 months.

The Flow measure of rental property rose 0.1 per cent in April and 4.2 per cent for the year.

The flow measure of rents captures rental price changes only for dwellings that have a new tenancy started in the reference month. It tends to be more volatile than the stock measure, which shows rental price changes across the whole rental population, including renters currently in tenancies.

Implications for Inflation

The Selected Price Index data was more inflationary than expected, said ANZ economist Henry Russell.

“While overall today’s SPI were on the stronger side of expectations, the miss was not significant enough to alter our view of [second quarter inflation] and we remain confident that headline inflation will be back within the RBNZ’s 1-3 per cent target band in the third quarter this year. "

“The SPI covers the more volatile components of the CPI basket and given the immense volatility it is challenging to diagnose signal from noise in these data.”

On its own, the new data probably won’t have been a big surprise for the RBNZ, said Westpac senior economist Satish Ranchhod.

“However, it follows the March quarter result that was stronger than they had expected. Overall, the RBNZ is looking at a firmer inflation outlook than they had assumed when they last published forecasts in February.”

Looking through the month-to-month volatility, while lower import prices had pulled down inflation, the data highlighted the continued firmness in domestic prices such as rents, he said.

“As a result, we continue to expect a gradual easing in overall inflation. Inflation is only likely to drop below 3 per cent late this year, and a return to the 2 per cent target is still a way off.”

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.

If you have a burning question about the quirks or intricacies of economics, send it to liam.dann@nzherald.co.nz... or leave a message in the comments section. He’ll try to answer in Inside Economics, a new column published every Wednesday.