Are food price rises finally over?
Food price pressure has been one of the big themes of the past few years.
A mix of supply chain pressures, pandemic disruption and wild weather events pushed prices up significantly.
At the peak, prices were up by more than 12% year-on-year. An annual food survey run since the 1970s recorded its biggest annual increase ever. But now new data shows some relief, and economists say that prices are finally stabilising.
Stats NZ’s food price data for March showed prices up 0.7% compared to a year earlier, the smallest increase since April 2021. It followed a 2.1% increase in the year to February.
In March, grocery food prices were up 1.7% and meat, poultry and fish up 0.2%.
A big part of the drop in the rate of increase was the price of fruit and vegetables. This time last year, the market was disrupted by Cyclone Gabrielle.
Fruit and vegetables were 13.3% cheaper this year than last.
“The annual decrease in fruit and vegetable prices was the largest recorded since the series began in 1999,” consumer prices manager James Mitchell said.
“This was driven by cheaper prices for tomatoes, lettuce, and avocados.”
ANZ economist Henry Russell said food price rises had been softer than expected in the past few months.
He said while much of that was due to the normalisation of fruit and vegetable prices after last year’s disruption, there was reason to believe that there was a more sustained trend.
“We’re also seeing evidence that softer food prices will be enduring, particularly stemming from lower imported food prices. That does suggest to us that large scale food price increases have passed.”
Infometrics chief forecaster Gareth Kiernan said food prices, excluding fruit and vegetables, had virtually levelled off since last April. “Although the overall food price index is being a bit distorted by the high post-cyclone prices for vegetables being reversed out, the underlying trend is still one of more stable prices coming though now.”
But another independent economist, Benje Patterson, said while it was good news for shoppers, there was reason to worry. “A big part of the decline has been driven by a weakening of fortunes for key export commodities. The biggest contributor to the monthly fall was the fruit and vegetables group, driven by cheaper prices for kūmara, apples, and grapes.
“The meat, poultry, and fish group also contributed to lower food prices, driven by cheaper prices for lamb, beef steaks, and bacon.
“If the prices of these goods are falling, it's not just households getting ahead at the supermarket we need to think of. These falling commodity prices are symbolic of squeezed incomes for many farmers, which in turn will reinforce the recessionary trends we are seeing in many parts of regional New Zealand.”
Foodstuffs said its supermarkets recorded zero price inflation on their goods included in the food price index basket over the year.
Chris Quin, Foodstuffs NZ’s managing director, said it was a big achievement.
“It’s been the toughest inflation fight many of our current generation of local grocers have experienced, and they know there’s more work to do.”
In March, the co-ops recorded a 3.3% year-on-year increase in what suppliers charged for the same goods in Stats NZ’s food basket.
Cafes and restaurants still more expensive
The data showed that restaurant meals and ready-to-eat food prices were up 6.4% over the year. “Visiting a café or restaurant, or getting takeaways was more expensive in March 2024,” Mitchell said.
Prices for alcoholic beverages were up 5.2% in March 2024 compared with March 2023, mostly driven by higher prices for beer, up 7.1%.