Food prices have fallen for now the fourth consecutive month, taking annual food price inflation down to 4.8% - its lowest level since December 2021 - according to Statistics NZ.
But if that's good news, less encouraging news on the inflation front is separate information from Stats NZ also released on Thursday showing air fares skyrocketing in December, while rent inflation is still increasing. More on that below.
Back on the food prices: While 4.8% is still well outside of the general inflation target of 1% to 3% its a lot lower than the rate of 12.5% that was seen earlier in 2023.
Stats NZ said monthly food prices fell a seasonally adjusted 0.1% in December 2023 compared with November 2023.
The biggest contributor to this fall was non-alcoholic beverages, driven by prices for fizzy drinks and energy drinks. Other items that have contributed to the monthly fall include tomatoes, nectarines, and lamb.
Stats NZ said that In December 2023, 45% of items fell in price, while in December 2022, 39% of items fell in price.
"We are continuing to see more food items fall in price than a year ago," Stat NZ's consumers prices manager James Mitchell said..
“In the last year, five months have shown a price fall,” Mitchell said.
“The changes we are seeing in food prices for the last few months are comparable to what we saw prior to 2020.”
In terms of the annual picture, in December 2023, the annual increase was due to price rises across the five broad food categories measured by Stats NZ. Price movements for all five groups for the 12 months to December 2023, in order of their contribution to the overall movement, were:
- restaurant meals and ready-to-eat food prices – increased 7.1%
- grocery food prices – increased 5.4%
- non-alcoholic beverage prices – increased 5.5%
- meat, poultry, and fish prices – increased 2.3%
- fruit and vegetable prices – increased 1.5%.
“The largest contribution to the annual change was restaurant meals and ready-to-eat food, mainly driven by higher prices for dine-in meals and takeaways,” Mitchell said.
The food price release is now included as part of the new Selected Price Indexes (SPI) data series that Stats NZ has started producing to give more timely inflation information.
The SPI contains information that makes up around 45% of the Consumers Price Index, New Zealand's recognised measure of inflation. It's not a replacement for the CPI, which will continue to be issued quarterly, but is intended to provide more timely information in advance about inflation.
This new data series from Stats NZ replaces the separate releases that were formerly issued monthly for food prices and for rents. In addition to the new monthly price indexes for food and rents, Stats NZ will now publish monthly indexes for petrol and diesel, alcohol and tobacco, airfares and accommodation. The data is all backdated to 2011.
Economists are seeing the SPI as helpful since it covers off some of the more volatile pricing ingredients in the CPI. The latest SPI release comes only days before the official CPI release for the December quarter due out on January 24.
Okay, so did we say volatile prices? The latest SPI shows that international airfares skyrocketed by a truly eye-watering 42% in December, something presumably anybody who was trying to get home for Christmas from overseas might have been able to tell you. It is worth noting, however, that in the previous December in 2022 there was a similar hike in international prices during that month of 41%. So, you could say it is 'normal'.
Domestic airfares rose 6.9% in the December 2023 month, which compared with an 8% domestic fare rise in December 2022.
These figures are obviously seasonal.
What's not seasonal and will be of concern to the inflation-fighting Reserve Bank is the fact that rent inflation is rising strongly again after seeming as though it might be starting to slow a little.
In December the 'flow' rate - measuring cost of new tenancies - rose by some 1.4%, which is the highest increase since March 2023. The 'stock' rate measuring the cost of existing tenancies rose by 0.5%, which is the highest rate of increase since July.
These latest increases saw the annual 'flow' increase rise to 7.0% from 5.5% in November, while the 'stock' annual increase rose to 4.4%, up from 4.3% in November and well ahead of the RBNZ's 1% to 3% general inflation target.
Here is the detailed SPI information as supplied by Stats NZ:
| Group, subgroup, class, item, or selected section | December 2023 monthly percentage change (compared with November 2023) | December 2023 annual percentage change (compared with December 2022) |
| Food group | -0.1 | 4.8 |
| Fruit and vegetables | 2.5 | 1.5 |
| Meat, poultry, and fish | -1 | 2.3 |
| Grocery food | -0.3 | 5.4 |
| Non-alcoholic beverages | -2 | 5.5 |
| Restaurant meals and ready-to-eat food | 0.3 | 7.1 |
| Alcoholic beverages and tobacco group | -0.4 | 8 |
| Alcoholic beverages | -0.7 | 5.3 |
| Cigarettes and tobacco | -0.1 | 11.4 |
| Housing and household utilities group | ||
| Stock measure of rental property | 0.5 | 4.4 |
| Flow measure of rental property | 1.4 | 7 |
| Transport group | ||
| Petrol | -4.8 | 12.5 |
| Diesel | -7.4 | -7.5 |
| Domestic air transport | 6.9 | 0.2 |
| International air transport | 42 | -15.2 |
| Recreation and culture group | ||
| Domestic accommodation | 2.7 | 11.2 |
| Overseas accommodation | -1.7 | 8.4 |
21 Comments
Yes, either that or immediate deflation. The high inflation over the last couple of years is now baked-in to prices - that $2.00 chocolate bar is now $2.50. This is what hurts especially for poorer families. Fuel & transport costs may have been high in 2022-23, but if we accept that container costs are now returning to pre-Covid levels, why don't those lower logistics costs now result in lower prices at the supermarket?
You're the odd one out if your salary didn't change over the last 2 years. Average wage inflation has been strong. https://www.stats.govt.nz/news/annual-wage-cost-inflation-at-4-3-percent
Yes super payments also went up and so did unemployment and other benefits.
Had a look - once you remove Jan 23 and Feb 23 increases out (and assume Jan 24 and Feb 24 remain static - note the last 5 months have decreased) annual food inflation drops to 1.6%!
I wouldn't read much into the airfares stuff - its seasonality for December and after Air NZs sales you'll see that drastically drop off in the next month or two.
I did the same but my thinking was how the RBNZ would use such data.
Would they 'look through' the events of Jan/Feb? In which case food prices should have dropped after they were raised due to supply being returned and as we are seeing now. Or will they simply overlook them (i.e. ignore them) as a reason to keep the OCR high?
Once a central bank starts selectively picking statistics to meet their previous predictions it is time for clear-out - starting at the top.
"What's not seasonal and will be of concern to the inflation-fighting Reserve Bank is the fact that rent inflation is rising strongly again after seeming as though it might be starting to slow a little."
Rent inflation seeming to slow after we imported a new Dunedin worth of people in a year? Yeah nah
RBNZ raised the OCR - house prices drop ... but rents rise.
That should surprise no one.
Very few residential property 'investors' would have no mortgage over their 'investment' as it is just plain idiotic not too.
Just another reason why the OCR is dumb tool (was it ever a smart one?) and why the RBNZ needs to get stuck in creating new tools to fight inflation. (Oh, and government can help out too by becoming more fluid with personal & small business tax rates.)
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