Food prices increased by just 0.7% in the 12 months to March, the smallest increase Statistics New Zealand has reported since April 2021.
According to figures released by Stats NZ on Friday, the 0.7% rise in the latest period is a steep decrease from the 12.1% food price surge seen in the 12 months ending March 2023.
Stats NZ reported the smaller annual increase was due to cheaper prices for fruit and vegetables which dipped down 13.3% in the 12 months to March 2024 and was driven by cheaper prices for tomatoes, lettuce, and avocados.
“The annual decrease in fruit and vegetable prices was the largest recorded since the series began in 1999,” Stats NZ’s consumer prices manager James Mitchell said.
ASB senior economist Mark Smith said the fall in food prices had continued the “soft run” they’d been experiencing and the bank expected the annual food price inflation to remain low over the rest of 2024.
“This will be a relief to beleaguered consumers and will help drive overall inflation lower,” he said.
Smith noted that ASB continues to expect people won’t want to pay higher prices for groceries and said discounts and deals from supermarket rebranding promotion will keep grocery prices from going up in the next few months.
Apart from fruit and vegetables, Stats NZ reported all other broad food groups increased in the 12 months to March 2024. Price movements, in order of their contribution, were:
- restaurant meals and ready-to-eat food prices – increased 6.4%
- grocery food prices – increased 1.7%
- non-alcoholic beverage prices – increased 4.3%
- meat, poultry, and fish prices – increased 0.2%
This is all according to the latest monthly release of Selected Price Indexes (SPI) by Stats NZ.
The SPI late last year replaced Stat's NZ’s previous monthly releases for food prices and rents and alongside those monthly indexes, they now also publish indexes for petrol, diesel, alcohol, tobacco, airfares, and accommodation.
Stats NZ's Selected Price Indexes incorporate about 45% of the Consumers Price Index (CPI), with the actual March quarter CPI being released next Wednesday. The SPI isn't meant to replace the CPI – which still comes out every three months – but is meant to give preview information about inflation.
Stats NZ said monthly food prices had fallen 0.5% in March 2024 compared to February 2024.
Mitchell noted that food prices have declined in seven out of the last 12 months. The main drivers behind these monthly decreases were the fruit and vegetable category, led by reduced prices for kūmara, apples, and grapes.
Additionally, the meat, poultry, and fish category also played a role in lowering food prices, driven by decreased prices for lamb, beef steaks, and bacon.
In March 2024, alcoholic beverage prices saw a 5.2% increase compared to March 2023 when they were up by 1.2%, primarily due to a 7.1% rise in beer prices.
“The cost of buying a box of beer bought off license was 10% more expensive than a year ago, while a pint of beer at a bar or restaurant was 6% more expensive,” Mitchell said.
Tobacco prices – which sit under Stats NZ’s alcoholic beverages and tobacco group – were also up 10.3% compared to March 2023.
Petrol prices have rocketed up 14.6% since March 2023 but were up only by 1.2% from February 2024.
“Movements in global oil prices and the NZD will be pivotal, and we envisage some near-term upside. However, the dropping of the Auckland regional fuel tax from July and no increases to fuel excise over the next 3 years should help cap future fuel prices,” Smith said,
Going in the other direction is international airfares, which have fallen 15.1% in the 12 months to March 2024, and down 4.1% since February 2024.
“We still expect sizeable falls over 2024 as the COVID-19 premium unwinds,” Smith said.
Domestic airfares edged up 1.4% in the annual period and are 4.8% higher than February.
The cost of accommodation both internationally and domestically has increased in the 12 months to March 2024 – domestic by 4% and international soared up by 30.5%.
In terms of rents, which make up about 9.5% of the CPI and have been rising strongly in past SPI releases, the ‘stock’ measure of existing tenancies rose by 0.4% in March and an annual increase of 4.6%.
The ‘flow’ measure of new tenancies which can be volatile edged up by 0.6% on a monthly basis, while the annual rate of increase was 5.1% – down from 6% the previous month.
Here is the detailed SPI information as supplied by Stats NZ:
The March 2024 food price index figures follows a 2.1% food prices increase in the 12 months to February 2024, which was also considered low last month.
In the month of February there were signs of potential stabilisation in the rate of rent increases, alongside a resurgence in domestic airfares over that month.
Petrol prices in February also saw an uptick, while the cost of overseas travel accommodation for New Zealanders experienced a notable spike.
35 Comments
they are mainly not dropping , slower inflation still means price growth. I'd rather pay more for fruit and vegies and if farmers get more money rather we have higher rents. Nothing new, whenever some money flow reduction happens it is just redirected to RE industry. Pathetic !
Please use maths, food prices are still rising but with seasonal considerations they are rising slightly slower. Food is getting less affordable everyday still, not more. For many on fixed incomes (with little to no increases in income) food prices rising (no matter the rate of rise) is a significant impediment even if the rises may be small chips to you.
The food shortages related to Cyclone Gabrielle are about to drop out of the 'annual' figures.
"Mitchell noted that food prices have declined in seven out of the last 12 months."
If there was a time to 'look through' some categories of inflation - that was one. Note that temporary hikes in prices are dis-inflationary as they too 'suck money' from people's wallets. (But hey, let's suck more money out, drive wage pressures, and transfer it to overseas lenders and banks instead - Recession be damned!)
Yes, NZ food prices simply follow global prices with a 12-month delay. Why? Because prices get contracted in ahead of time; we pay cost + mark-up for food (unless we can export at a higher price, then we pay that); wholesale and retail margins for grocery food are unshakeable because we have zero meaningful competition.
Orrrrrr, maybe none of the above is true, and food prices are coming down because mortgagors have less disposable income?
Thought son the significance of this factor in current prices? Granted many went with shrinkflation, charging more and providing less, and being able to use inflation as a ruse to hike prices, nobody would be willing to go backwards if their margins are still the same or improving, or as you say, reduce input to reduce supply.
I only have reckons, but I suspect the impact is highly varied. I know that many retail businesses are discounting and clearing stock to stay afloat - sales of clothes and durables are absolutely tanking. This will be having a deflationary effect. However, people are still buying the consumables they need, and our ridiculous wholesale / retail duopoly appears to be coasting through the downturn with margins intact. Remember that import prices have been falling for a year so wholesalers / retailers can increase their profits and margin by simply selling a bit less at static prices.
Most retailers in my market still have lots of inventory. I still have a warehouse full of stock ordered during the suez canal blockage. We are all working through clearing our current inventory before placing more orders. The sales reps are ringing daily and even the usually upbeat ones seem pretty glum when they call. I have also seen two of our competitors leave the market shutting stores as leases end .
No, not at all. They did exactly that in 2020/21 - adding 200pts to their margins. Note though that this was masked by falling import costs.
What I am saying is that in normal circumstances when customers are watching prices, our grocery retailers and wholesalers make a steady margin (6% and 8% operating profit). This has not dropped in the last year, which suggests to me that falling demand has not pushed them into dropping their margins.
It's funny though isn't it? We are kind of saying that we can't have more disposable income because if we do, then supermarkets, landlords etc will just take it off us. I guess this is why wealthy countries (like Switzerland, Denmark etc) have price controls across a lot of their economies.
A dog eat dog race to the bottom. At one end you have landlords/businesses trying to take as much discretionary income from consumers, and the other end businesses trying to screw employees wages down.
A huge own goal for businesses in general, destroying the buying power of the consumer = reduced customers. Worse, when businesses need to increase their margins to cover their fixed overheads on a smaller customer base, this can further exasperate the issue as even less people can afford their goods/services.
Let's hope so.
But I expect the RBNZ to engage in selective picking of inflation stats and more word soup to justify why they need to drive NZ Inc. even further backwards.
(Or maybe they're playing hard ball with the banks to ensure DTIs are implemented in time? If so, I wish they'd come out and say it.)
Auckland rents are moderating quickly after the big inward migration boom. Over the last year, average year-on-year increase in new rents in Auckland has been around 7% (peaking at 10% year-on-year increase in Sep 23) . However, Auckland is back under 5% in March 24 - are the jobs drying up?
Wellington is on it's arse - hovering around 2% rent inflation over the last year - well below inflation. Note that Auckland and Wellington rents converged last year as they have done at the bottom of every economic cycle. But, will Auckland pull away now?
An outbreak of boarded up shops is only a few months away in Wellington. Things are going downhill quickly there - every indicator is flashing red.
Graph I'm looking at paints a different picture naturally however one would expect smaller new quarterly increases as prices re adjust and reset from the inflated values .... but ultimately the last 12 months have not been kind to renters. Wellington 9.6% up... Auckland 8.3% UP... ALL 9.1% UP..... last 12 months... April 2024 Last time rents stagnated 97 Asian currency crisis and 2008 GFC.... source https://www.opespartners.co.nz/property-management/historical-rent-incr…
Inevitably ...its all about making values stick and whether the values can be affirmed . Kiwis have short memories and normalising value increases seems to be an art based on what the regulatory environment feels folk can sustain. Capitalism is all about extracting wealth but killing the golden goose is a sin...so everything is measured and adjusted to suit would be my take on it all....
"This is all according to the latest monthly release of Selected Price Indexes (SPI) by Stats NZ.
The SPI late last year replaced Stat's NZ’s previous monthly releases for food prices and rents and alongside those monthly indexes, they now also publish indexes for petrol, diesel, alcohol, tobacco, airfares, and accommodation.
Stats NZ's Selected Price Indexes incorporate about 45% of the Consumers Price Index (CPI), with the actual March quarter CPI being released next Wednesday. The SPI isn't meant to replace the CPI – which still comes out every three months – but is meant to give preview information about inflation.'
So real CPI is5%?
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