Food prices fell 0.9 per cent in October 2023 due to broad falls in the majority of subgroups.
Food prices fell 0.9 per cent in October 2023 due to broad falls in the majority of subgroups.
In the slow and painful march back towards normal levels of inflation, the news that food prices fell in October will be welcomed by Kiwis.
Food prices in New Zealand were still 6.3 per cent higher than they were a year ago, but they were cheaper in October than theywere a month earlier, according to figures released by Stats NZ.
Food prices fell 0.9 per cent in October 2023 due to broad falls in the majority of subgroups. Even adjusting for seasonal effects, they fell 0.1 per cent.
The fruit and vegetables subgroup was the largest contributor to the monthly fall, followed by grocery food.
The grocery items that contributed the most to the monthly fall were cheese, white bread and muesli bars.
For many New Zealanders, cheaper cheese will be a psychological turning point in the inflation fight.
Cheese is culturally significant grocery item in a major dairy-producing nation, and one that has been a flashpoint for cost of living complaints in the past two years.
There was outrage in May 2022 when the price of a one-kilogram block of Tasty cheese hit $21.50.
Global commodity prices for dairy soared, and Fonterra’s farmgate price hit a record high of $9.30/kg in 2021-22.
But the commodity price for dairy has fallen significantly since the start of the year, raising expectations of lower retail prices.
In July, Westpac senior agri economist Nathan Penny warned there was often a long lag as farmgate prices for milk flowed to retail.
The reason for the big lag times between wholesale auction prices is the duration of contracts between the manufacturers and retailers, he said.
“The raw material component of a retail product is not that big either.
“There are all the other components that go into it, like transport, wages, marketing and branding, which kind of waters down the impact of the raw milk price to a degree,” he said.
But Penny said he expected the retail price of dairy products to decline gradually.
“Retail prices are much slower-moving, so there will be a gradual decline, but we do expect, for the remainder of this year, them to lead lower rather than higher,” he said.
Prices fell across the board in October, with only dining out and takeaway food being more expensive than in September. Photo / iStock
On an annual basis, prices still rose across the five broad food categories measured by Stats NZ. Price movements for all five groups for the 12 months to October 2023, in order of their contribution to the overall movement, were:
Grocery food prices increased 7.9 per cent;
Restaurant meals and ready-to-eat food prices increased 7.7 per cent;
Non-alcoholic beverages prices increased 5.7 per cent;
Meat, poultry, and fish prices increased 3.3 per cent;
Fruit and vegetables prices increased 3.3 per cent.
“The largest contributing food group was grocery food, mainly driven by higher prices for fresh eggs, potato crisps, and yoghurt,” consumer prices manager James Mitchell said.
“Prices fell across the board in October, with only dining out and takeaway food being more expensive than in September,” Mitchell said.
The monthly food prices were released as part of Stats NZ’s new Selected Price Indexes series.
The new series will provide more timely inflation data than the full Consumer Price Index, which is produced every three months.
It adds petrol, travel and alcohol to food and rent pricing data, which is already produced monthly.
The combined Selected Price Index series will mean we get a monthly read price changes each month for around 45 per cent of New Zealand household spending.
The new data showed petrol prices also fell in October 2023 compared with September 2023 - down 1.1 per cent.
Domestic air transport prices fell 9.4 per cent and international air transport prices fell 7.5 per cent. However, diesel prices rose 1.6 per cent.
Rental prices also rose slightly month-on-month.
Annual inflation as measured by the Consumer Price Index was 5.6 per cent in the year to September 30.
In its latest Economic Outlook, ANZ economists said they expect headline inflation to return to the Reserve Bank of New Zealand’s 1-3 per cent target band by the end of 2024, helped by the tailwind of falling tradables inflation.
“Global goods disinflation is finally washing on to New Zealand’s shores. While geopolitical instability is generating substantial volatility in oil markets, and poses upside risk to inflation, we expect a faster normalisation in tradables inflation than previously,” ANZ said.
“Shipping costs are back to pre-Covid levels, global supply chain disruption has faded, international airfares continue to fall as capacity increases, and food prices look to be returning to a ‘new normal’.”
