Food prices fall 0.5% in February and reverse January's sharp rise while annual grocery costs continue to climb

Food prices slipped 0.5% in the month of February, turning around January’s food price gains.

Statistics New Zealand released its Selected Price Indexes (SPI) for the month of February on Friday, which found food prices have risen 2.4% in the past 12 months but fell 0.5% on a monthly basis.

February’s SPI is a big decrease from the month of January when food prices jumped 1.9% and reported the largest monthly increase in almost three years. 

Stats NZ’s prices and deflators spokesperson Nicola Growden said higher prices for the grocery food as well as restaurant meals and ready-to-eat food contributed the most to the annual food prices increase.

Grocery food prices are up 4.3% and restaurant meals and ready-to-eat food are up 2.5% compared to February 2024.

Annual grocery food prices were higher because prices for milk, butter, and olive oil had risen so much.

For example, Growden said the average price of 2L of milk was $4.55 in February 2025, up from $3.94 in February 2024.

“The average price for a 500g block of butter was $7.32 in February. That’s an increase of over 60% since this time last year,”  she said.

Fruit and vegetable prices were down 3.6% in February compared to January and fell 6.2% compared to February 2024. It was the only food group in the February SPI basket to record lower prices.

Growden said prices for seasonal fresh produce were cheaper in February and specials for Valentine’s Day also contributed to lower food prices, with boxed-chocolate prices down about 26% in the month.

This was a big difference in chocolate prices to the previous month’s SPI where the rapid food price increase in January had been driven by boxed chocolates and chocolate blocks. 

Stats NZ found international airfare prices slipped down by 5% in the 12 months to February 2025 but had a massive fall of 14.6% in the month of February.

Domestic airfares also fell but much lower – down 3.6% in the month of February and down 3.7% in the 12 months to February 2025.

“Getting to your overseas destination was cheaper than this time last year, while the cost of staying there was more expensive,” Growden said.

Meanwhile, domestic accommodation decreased by 3% in February compared to an annual 14.5% fall. International accommodation was down 5.4% in February and 1.3 annually.

Not confident

Rentals, which make up 9.5% of the CPI, were not included in the February 2025 SPI release as Stats NZ said the dataset used to compile February’s rental information was incomplete.

“[...] we are not confident the measure will meet customer expectations. We will provide a further update in due course,” Stats NZ said.

In January, Stats NZ said the ‘stock’ measure of rentals was up 0.1% compared to December 2024 and up a higher 3.6% on an annual basis. 

Stats NZ did not release the ‘flow’ measure of rentals (which is applicable to new tenancies) in January, saying it was continuing to work through a new data system for these measures.

Tweaks

Stats NZ’s SPI features goods comprising about 45% of the quarterly Consumers Price Index (CPI) – the official measure of inflation – and the monthly SPI paints a picture of where the path of inflation is going.

Economists at ANZ and BNZ had noted in reports before February's SPI was released on Friday that because January's selected prices had been stronger than expected, February’s SPI could also hold some surprises.

BNZ’s Stephen Toplis said there appeared to be some “unwelcome momentum” in prices, going off January's SPI. ANZ economists wrote in a report that “another significant upside” in February’s SPI could warrant a CPI forecast tweak.

As of the December quarter, actual inflation as measured by the CPI was still running at an annual rate of 2.2%, having not budged from the 2.2% rate it was sitting at in the September quarter. 

It’s right within the Reserve Bank's targeted inflation range of 1% to 3%, and is the first time it has been this low since mid-2021.

The latest CPI data is being released by Stats NZ on April 17th.

More volatility

ANZ economists said in a note on Friday following the release of the February SPI that the latest data continued to hint at “mild upside risk” to ANZ’s April CPI forecast.

“As is often the case, the SPI data in February had a little more volatility in the components than we had pencilled in. And weighted together, these data continue to suggest a touch of upside risk to our Q1 CPI forecast of 0.8% q/q–but not enough to warrant a forecast tweak,” they said.

Westpac senior economist Satish Ranchhod said February’s falls in food prices only reversed a small portion of January’s large rise.

“Food prices account for 20% of household spending, and their recent strength will be an important driver of overall inflation in the March quarter,” he said.

ASB senior economist Mark Smith said on Friday afternoon that February’s SPI wasn’t as weak as ASB had expected it to be.

“A lot can happen over the next few months, but the figures suggest that the mid-2025 peak in annual CPI inflation could undershoot the 2.7% February MPS view,” he said.

“Our core view is also that the volatile global scene and risks of a trade war are likely to deliver a negative hit to NZ medium-term inflation.”