Food prices edged up 0.1% in December, following a 0.1% drop in November, according to Stats NZ.
The increase in December brought the annual increase in food prices up to 1.5%. On a seasonally-adjusted basis, the food prices rose 0.2% in December following a revised 0.5% seasonally adjusted rise in November.
The information's been released as part of the monthly Selected Price Indexes (SPI) series, which includes items that make up about 45% of the Consumers Price Index, the recognised measure of inflation. The CPI for the December quarter is due to be released on January 22 and the Reserve Bank (RBNZ) is forecasting it will show annual inflation at 2.1%, down from 2.2% in September. The RBNZ aims for inflation in a 1% to 3% range, with an explicit target of 2%.
ASB senior economist Mark Smith said the latest SPI figures were broadly in line with expectations, with prices up 0.5% over Q4.
The monthly figures are consistent with the the RBNZ's 2.1% CPI pick, he said.
"Annual inflation from the monthly [SPI] measure is now trending higher, reducing the risk of annual CPI inflation settling below 2%."
ASB economists expect another 50 basis point cut to the Official Cash Rate by the RBNZ next month - which would take it down to 3.75% and they see a 3.25% OCR "endpoint".
"However, the outlook for 2025 remains incredibility uncertain with the timing and magnitude of OCR moves dependent on outlook and developments over 2025," Smith said.
So, as indicated above, there appears nothing in Thursday's December SPI data to suggest any nasty surprises in next week's CPI release, although the latest release does not include actual rentals for housing data for December 2024. Rentals make up 9.5% of the CPI.
Stats NZ says the administrative data for this information is provided by the Ministry of Business, Innovation and Employment (MBIE). MBIE has recently completed upgrades to their tenancy bond-lodgement system, "and we need more time to integrate this data for the rental price indexes".
"We’re working to integrate this dataset in time for the release of Selected price indexes: January 2025 in February 2025."
Stats NZ will use information previously received on rents for October and November in calculating the rental price input for the December quarter CPI.
But back on the food, the December month saw a 3.1% rise in food and vegetable prices (but these are down 8% across the whole year), while meat, poultry and fish, grocery food and both alcoholic and non-alcoholic drinks saw price falls.
In terms of the whole year higher prices for grocery food and restaurant meals and ready-to-eat food drove the annual increase in food prices, up 2.7% and 3.1%, respectively, Stats NZ said.
The price increase in grocery food was due to higher prices for butter, standard 2L milk, and olive oil.
"The price for a 500g block of butter has increased by about 50% since this time last year, with an average price of $6.66,” Stats NZ's prices and deflators spokesperson Nicola Growden said.
"The same-size block of butter had an average price of $4.48 in December 2023."
Kumara prices, which rocketed in 2023 were around 60% lower in December 2024 than they were 12 months earlier.
The price increase in restaurant meals and ready-to-eat food was due to higher prices for lunch/brunch, hamburgers, and evening restaurant meals.
In terms of some of the other prices in the SPI, international travel prices had their 'normal' gigantic leap in December, rising by some 29.6%, but prices were actually down 10.3% annually. Domestic prices rose just 0.3% in December and were up 2.8% for the year.
Domestic and international accommodation prices both dropped in December.
Although petrol and diesel prices are both down on an annual basis - they both rose in December and these prices will certainly be worth watching in coming months.
Here is the detailed SPI information as supplied by Stats NZ:
36 Comments
I was looking at inflation reported in other countries, and saw South Africa reports inflation per income decile. Does Stats NZ do something similar?
Guess you would need to weight the basket of goods separately for each decile based on what they actually spend their money on.
https://www.stats.govt.nz/information-releases/household-living-costs-p…
It is worth noting that to be in the highest quintile (5) your individual income is deemed to be $55,368 or greater.
But note that the CPI and the HLPI are not quite the same: "One important difference between the two is the treatment of housing. The CPI captures the cost of building a new home, while the HLPIs capture mortgage interest payments."
The HLPI is a better reflection of living costs for many households.
Inflation measures, particularly those used by govts and central banks, typically exclude asset prices such as real estate, stocks, and bonds. This exclusion raises questions about the accuracy and comprehensiveness of inflation statistics like the CPI.
The exclusion of asset prices from inflation measures is rooted in both theoretical considerations and practical challenges associated with volatility and measurement bias. While this approach simplifies the calculation of consumer-focused inflation metrics, it may obscure important economic signals and contribute to a distorted understanding of overall economic health. As discussions around wealth inequality and economic stability continue, the sheeple are more or less thrown into a maze.
It's important for you to understand. What is reported to you as 'inflation' is simply a construct and disguises the reality that expanding the money supply is also 'inflation.' Now think about how this monetary expansion is the conversion of base into broad money. That's right. It's through asset prices. And let me give a 'dumbed down' example. The cost of housing construction is considered a proxy for the Ponzi. But it's a very crude and deceptive proxy considering that the exchange and transacting of existing houses is an entirely different dynamic than the production of a new house. In many ways, chalk and cheese.
The RBNZ published a white paper in 1988 proposing to replace house prices with equivalent rent in their inflation calculations. The reason given was the calculated figure was lower, making the figures and thus the RBNZ look better. The proposal was applied in the early 90s.
However, equivalent rent moves in step with rent which moves in step with income. But house prices, absent the control metric formerly linked, were now decoupled and free to inflate independently of incomes. Coupled with our neo-feudal tax laws, this caused significant inflation in monetary 'supply' with little control (wait till there's a run on property [everyone tries to sell at once] - the emperor is wearing no clothes and the money that is NZ's housing property stock doesn't exist, but the private banks have made out like bandits meanwhile).
If they hadn't done this, 1. Interest rates would have been on average higher, acting as a shock absorber to the monetary oil flowing into housing market. 2. Property wouldn't have departed from incomes, as excessive price increases would self correct due to the corresponding interest increase (basic control theory). 3. The inequality caused by our neo-feudal tax laws would have been significantly reduced. Who knows how many current social issues could have been avoided.
Note NZ was not alone in doing this.
The Australian Bureau of Statistics uses equivalent rents, specifically through the concept of imputed rent. This is included in income assessments to provide a more accurate analysis of economic wellbeing across different housing tenures. However, since 2022, they use actual rents used in the CPI by utilizing a large dataset - data from approximately 600,000 rental properties, representing about 32% of the national rental stock.
But as you suggest, the relationship between rents and house prices is complex as housing had not been a consumption good as in the past.
"Inflation measures, particularly those used by govts and central banks..."
Your history needs some work, J.C.
Governments had semi-valid measures of inflation before central banks stepped in with 'modern monetary policy' that hijacked CPI measures to align with the central banks using interest rates to control inflation. Probably the biggest con by the wealthy ever.
See Chaosinflesh post above for more info.
btw ... Fess up. Which A.I. did you use?
I disagree. The CPI has always been an artificial construct. Don't care if you put 1,000 PhDs in a commercial tower to work on it. Because there is no real measure of inflation to benchmark against, it's in many ways a crap shoot. In fact, monetary aggregates might give a better picture of reality. If I suggested that inflation could be 8-10%, there's a chance I could be asked to leave the BBQ and not invited back ever again.
Ah, so that's why I don't get invited to barbecues.
Entropy would suggest that inflation is the change in broad monetary quantity (so the summation of all assets/items) vs the count of said items, as all items decay (well, except digital bits as long as we have the power to maintain their storage).
Hard to calculate, yes. But a reasonable proxy would be those items that make up the bulk of the value of the items - assets like houses, shares, savings (which is just a transfer of dome physical element to digital).
Shelter, especially in NZ, is our most basic, most critical need. I would posit we would be better served, from an inflationary perspective, just measuring the change in the value of NZ's housing stock (edit: caveat if we fixed the tax laws). Somehow people at the BBQ are unable to see the incongruity having 7% house price inflation yet reporting only 2%! But we've done the opposite, and faff about with items far less consequential, at weightings that don't reflect their actual impact on the overall summation of all items.
IRD breakdown of income by percentile (June 2024) puts the top income quintile at $74,000:
https://www.ird.govt.nz/-/media/project/ir/home/documents/oia-responses…
I got it from here, in figure 1 on table view.
https://www.stats.govt.nz/methods/consumers-price-index-review-2020#reweight
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.