Food prices in New Zealand have shown signs of easing, giving relief to consumers. However, an economist warns that this shift may not be sustainable due to rising diesel costs and road user charges.
Statistics NZ’s latest annual food price data shows that while food prices rose 8% in the year to September, there has been a gradual decline since August, with a 0.4% decline. All categories saw an increase in food prices, with grocery being the largest contributor, up 10.7%. Prices of restaurant meals and ready-to-eat meals increased by 8.6% while prices of meat, poultry and fish increased by 6.9%. Non-alcoholic beverages grew by 8.3%. On the other hand, prices of fruits and vegetables decreased by 1.4%.
The decline in food prices in September could be attributed to the expected seasonal decline in prices of fruits and vegetables. Analyzing the trends, food prices have been rising below 10% year-on-year since August, indicating some moderation. Grocery prices have increased by a total of only 0.3% over the past five months, and overall food prices, excluding fruits and vegetables, have increased by only 0.2% over the past three months. These indicators provide insight into underlying trends and cost pressures affecting food prices.
However, the future stability of food prices is uncertain. The main risk lies in the upward pressure on transport costs due to higher diesel prices and the reintroduction of road user charges. An unexpected hike in diesel prices from July will affect the costs of all goods and services, including the transport component.
The data suggest that soft household demand and consumer resistance to higher food prices have influenced retail food price decisions. It is encouraging to see more resistance from consumers as this will help curb food price inflation. Low overall food price inflation, coupled with high consumer resistance to higher prices, will lead to a continued decline in food price inflation.
In the end, even if food prices show signs of abating, the risk of rising transport costs will push prices up again. Greater consumer resistance to paying higher prices and lower overall food price inflation will help curb food price inflation in the future.
proof’s: Statistics NZ, Informatics, ASB Bank.
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