Grocery and beverage costs push March food prices up 0.5%, with annual increase hitting 3.5% ahead of key inflation data out later this week

Food prices rose 0.5% in March, according to the latest Statistics New Zealand Selected Price Indexes (SPI), driven by higher prices for grocery food and non-alcoholic beverages.

The March SPI out of Stats NZ shows food prices have risen 3.5% in the 12 months to March 2025 and 0.5% compared to a month earlier.

Stats NZ’s SPI features goods comprising about 45% of the quarterly Consumers Price Index (CPI), the official measure of inflation tracked by the Reserve Bank. It means the monthly SPI provides a good idea of where the path of inflation is going.

The CPI for the March quarter is being released later this week.

In its most recent Monetary Policy Statement (MPS) forecast back in February, the Reserve Bank had forecast that New Zealand’s annual rate of inflation is likely to increase by 0.8% in the March quarter. 

Annual inflation is currently sitting at 2.2%. The Reserve Bank wants to keep inflation at between 1% and 3% and aims for the middleground target of 2%.

The 0.5% increase in the March SPI was because of higher prices for grocery food and non-alcoholic beverages, up 0.9% and 1.1%, respectively.

Stats NZ said higher prices for yoghurt and chocolate also contributed to the monthly increase in grocery food prices, while higher prices for instant coffee and soft drinks drove the increase in non-alcoholic beverage prices.

When it came to what contributed to the 3.5% annual increase in food prices, Stats NZ pointed to higher prices for grocery foods as well as meat, poultry, and fish. 

Prices for the grocery food group were up 5.1% compared to March 2024 and prices for the meat, poultry, and fish group were up 5.3% in that same period.

Stats NZ’s prices and deflators spokesperson Nicola Growden said the price increase for grocery food was due to higher prices for milk, butter, and chocolate. 

“The average price for a 250g block of chocolate was $5.99 in March 2025, that’s $1.60 more expensive than three years ago,” she said.

Milk prices have risen 16% and butter prices have jumped 63.6% in the 12 months to March 2025.

Stats NZ said lower prices for the fruit and vegetables group, had offset some of March’s annual food price increase, with prices down 2.7 % in the 12 months to March 2025. 

Rentals make up 9.5% of the CPI and the March SPI showed rental prices for housing rose 0.3% that month compared to February.

February’s rentals were not included in last month’s SPI data as Stats NZ said the dataset used to compile February’s rental information was incomplete. 

Domestic accommodation prices fell by 2.9% in March compared to an annual fall of 15.1% while international accommodation rose 8.8% in March and 9.9% annually.

Stats NZ found international airfare prices were down by 4% in the 12 months to March 2025 and a slightly larger fall of 4.8% during the month of March.

Domestic airfare prices went in the other direction and were up 2.2% in the month of March and rose 1.1% in the 12 months to March 2025.

Petrol and diesel prices both took a hit in March, with petrol down 2.1% in March and 6.2% compared to a year ago. While diesel prices were down 2.3%in March compared to February , diesel prices fell 10.6% on an annual basis.

Inflation outlook

ANZ senior economist Miles Workman said the SPI for March had come in higher than the bank had expected. This had moved ANZ to shift its inflation forecast for the March quarter from 0.8% to 0.9%.

“While today’s data moved our Q1 CPI pick, the fact the change has come from the volatile tradable side of the basket means a print in line with our expectation won’t be a game changer for the monetary policy outlook,” Workman wrote in a note on Tuesday.

“Indeed, the impacts of global market wobbles and economic uncertainty on the inflation outlook are far more important than a small (teeny tiny) upward surprise on tradables in Q1.”

Westpac has raised its March quarter inflation forecast as well, up from 0.7% to 0.8% because of the stronger than expected food prices data.

Westpac senior economist Satish Ranchhod said grocery food price increases had continued, with much of it coming from higher prices for dairy products.

“Chocolate prices rose nearly 5% ahead of Easter and are up 16% over the past year. As well as a drop in the NZ dollar, global cocoa prices have pushed higher. It seems even the Easter Bunny can’t fight inflation,” he said.

ASB has also changed its forecast for the March quarter CPI, upping it from 0.8% to 0.9%. ASB economist Wesley Tanuvasa said March’s SPI data was firmer than expected.

“The inflation outlook is inherently uncertain, further complicated by the tariff soap opera,” he said in a note.

BNZ hasn’t changed its inflation forecast for the March quarter and is keeping the bank's forecast at 0.9%. BNZ senior economist Doug Steel said March’s SPI supported BNZ’s view that annual inflation will push higher in the March quarter compared to the December 2024 quarter.

“A tick higher is neither here nor there in the big picture and arguably means less if it is driven by idiosyncratic factors like overseas accommodation prepaid in NZ. But it would mean the downside risk to inflation the RBNZ noted in its recent Monetary Policy Review would be from a higher starting point, and, thus, provide some risk to inflation expectations,” he said.

“We don’t think such a minor deviation would prevent the RBNZ from continuing to lower its cash rate. But such things are worth keeping an eye on, while also monitoring the mayhem offshore.”