As the cost of food increases at its fastest pace since 1990, Madison Reidy explains what could be causing the surge. Video / NZ Herald
Experts say there is no evidence inflation pressures are easing after Stats NZ revealed annual food prices jumped the highest in 32 years.
Food prices rose 1.1 per cent in the month of December and were 11.3 per cent higher than a year earlier, the highest increase since April 1990.
ANZ economist Finn Robinson said, “What we’re seeing in that data is no evidence that inflation pressures are easing. At this stage, it’s not encouraging.”
He said Stats NZ’s findings were much stronger than expected.
“When you consider that food prices are usually flat or falling in December because of seasonal patterns in vegetable prices, to see such a strong positive number in December month, that’s a very strong print for the data.”
Robinson said the data “certainly does nothing to ease the Reserve Bank’s fears that they’ve got a really serious inflation problem ahead of them”.
“They’ve been expecting that headline inflation would be at 7.5 per cent which would represent a reacceleration of inflation pressures and the fact that food prices have come in strong, it’s going to do nothing to allay those fears.
“Until the Reserve Bank is confident that inflation is going to ease, there’s not much they can point to to suggest interest rates need to increase by less than they expect.”
The annual increase Stats NZ recorded was due to rises across all the broad food categories measured.
Fruit and vegetable prices increased by 23 per cent year-on-year.
Grocery food prices were up 11 per cent and restaurant meals and ready-to-eat food rose 7.8 per cent.
Infometrics principal economist Brad Olsen said the data “reinforced the continual pressure on Kiwi budgets” to afford staple household groceries.
“This reflects households’ continued strain and pressure to put basics on the table.”
Meat, poultry, and fish prices jumped 11 per cent, and non-alcoholic beverage prices rose by 7.3 per cent.
“Increasing prices for cheddar cheese, barn or cage-raised eggs, and potato chips were the largest drivers within grocery food,” Stats NZ consumer prices manager James Mitchell said.
Consumer NZ head of campaigns and communications Gemma Rasmussen. Photo / Supplied
In November, the annual food price increase had reached a 14-year high of 10.1 per cent.
Today’s price data was released amid a landscape of concerns about inflation and a possible economic slowdown this year.
ASB senior economist Mark Smith said food prices were slightly stronger than expected.
“Food price rises remain ingrained, and it appears consumers are cutting back where they can. Conditions are in place that should see New Zealand food price inflation cool over 2023, but a difficult year lies ahead for New Zealand consumers.
“Price rises were elevated despite December being a month when more pre-Christmas discounting takes place.
“It is our hope that annual food price inflation has peaked given lower global food commodity prices of late. However, the risk is that the current upward momentum in food prices takes longer to slow.”
Infometrics principal economist Brad Olsen. Photo / Jenny Ling
Olsen said, “Produce is likely to be under pressure for some time. Poor weather recently is likely to diminish horticulture produce, which is likely to push prices even higher”.
Robinson said the Reserve bank is between a rock and a hard place, “They want to get inflation down but activity measures are looking quite sickly at the moment.”
Consumer NZ’s Gemma Rasmussen said global supply issues are pushing prices even higher.
“As a nation, we are reliant on the international market for food prices – things like supply shortages, increases in fuel prices, the war in Ukraine, wheat prices, increases in fertiliser costs. We are really vulnerable to what’s happening overseas.”
She said food prices have jumped from the eighth-highest financial concern for households to the second-highest in the last year, behind housing.
“Consumer NZ feels there isn’t a healthy level of competition at supermarkets,” Rasmussen said.
“It can be hard for shoppers to know if the prices they’re paying are fair.”
She said shoppers can use apps like Grocer.NZ where people can compare grocery prices across local supermarkets.
“It may be about shopping around to find a way to bring down your grocery bill. It could be about changing the way they shop compared with a few years ago.
“For a lot of households, it is going to be a struggle.”
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