Statistics New Zealand says food prices have had their smallest increase since September 2018.
Food prices rose 0.2% in the 12 months to May, with the lower food price inflation driven by cheaper prices for fruit, vegetable, meat, poultry, and fish.
Fruit and vegetables prices were down 11.4% and meat, poultry, and fish prices were down 1.2%.
“Prices for meat, poultry, and fish recorded an annual decrease for the first time in over three years,” Statistics NZ's consumer prices manager James Mitchell said on Wednesday.
“The decrease was driven by cheaper prices for lamb chops, legs of lamb, and chicken pieces.”
The month of May also saw the largest number of food items falling in price in over three years, according to the latest Selected Price Indexes (SPI).
Last year, the SPI took over Stat's NZ's former monthly reports on food prices and rents. In addition to these monthly indexes, they now release indexes for petrol, diesel, alcohol, tobacco, airfares, and accommodation on a monthly basis.
Mitchell said 53% of the items Stats NZ tracks fell in price during May 2024, compared with 44% of items, which were more expensive.
Broader food groups like restaurant meals and ready-to-eat food prices were up 4.8% in the last 12 months, while grocery food prices edged up 1.3% and non-alcoholic beverage prices rose 2.7% in the same period.
“Eating out and ordering in are still taking the cake when it comes to the overall annual increase,” Mitchell said.
Cheese prices are at a five-year low and the price for a 1kg block of cheese was $10.02 per kilo in May 2024, down from $13.60 in May 2023.
“Of all the items in the food basket, cheaper cheese prices had the largest impact on overall food prices,” Mitchell said.
“Despite this, there was enough inflationary pressure from other items to record an overall food price increase.”
Petrol and diesel prices both fell in May, with petrol prices dropping 2.6% and diesel prices falling 3.3%.
However, petrol prices are over 50% more expensive than four years ago, while diesel prices are over 80% more expensive, according to Stats NZ.
“Motorists around the country enjoyed lower fuel prices in May, but they are still higher than May 2023,” Mitchell said.
He added that the removal of the Government’s transport temporary relief package “partly contributed” to the higher fuel prices this year.
Airfare prices experienced big falls, with domestic airfares down 7.9% and international airfares falling 8.2% in May. ASB economists expect airfare prices to continue to fall over 2024 as the “covid-19 premium unwinds”.
A turning point in the rent cycle?
In terms of rental expenses, Stats NZ noted that the ‘flow’ measure of rentals which is applicable to new tenancies, decreased by 0.1% in May, compared to April's increase of 0.1%.
The ‘stock’ measure of existing tenancies showed just a 0.3% rise in May, compared to the 0.5% uptick in April.
“Rent inflation for new tenancies has eased since the start of the year, tentatively suggesting a turning point in the rent cycle, though this tends to take nine months to be reflected in the CPI measure,” ANZ economists Miles Workman and Henry Russell said on Friday.
Workman and Russell said May’s SPI were weaker than the bank’s expectations but the weakness had stemmed from volatile components and there “remains a risk of payback next month”.
Because of this, ANZ’s Consumer Price Index (CPI) forecast currently remains unchanged at 0.6% for the June quarter and 3.5% for the June year for now.
'Encouraging for the Reserve Bank'
ASB senior economist Mark Smith said in an economic report on Friday that the SPI data would be encouraging to the Reserve Bank as it showed that pricing pressures were cooling which meant monetary policy was working.
ASB has its CPI forecast at 0.7% for the June quarter.
"The softening tone of the monthly pricing data provides us with greater confidence that CPI inflation will fall below 3% by year-end. The inflation fight is not yet over, but today’s data will be encouraging to the Reserve Bank," ASB says. "This could provide scope for the Reserve Bank to deliver Official Cash Rate cuts in 2024 providing that the circumstances warrant it."
Because of the weaker food prices data, Westpac economists said they had revised its CPI expectations from 0.8% in June to 0.6%.
ANZ and Westpac’s CPI forecast is inline with the Reserve Bank’s expectations from June’s inflation data.
“Today’s result also adds to the likelihood that inflation will slip back inside the Reserve Bank’s 1% to 3% target band by the end of this year,” Westpac senior economist Satish Ranchhod said.
March year CPI inflation was 4%.
Here is the detailed SPI information as supplied by Stats NZ:
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