'Not really any good news' as food price inflation the fastest rate since 1987

Thursday, 11 May 2023

Food price inflation is running at the highest rate since 1987 – with an increase in prices of 12.5% from April 2022 to April 2023.

Infometrics chief forecaster Gareth Kiernan said “there’s not really any good news in the latest figures”.

At 12.5%, food price inflation is now at its highest since 1987, which was a particularly high result due to the introduction of GST the previous year, he said.

The Stats NZ Food Price Index for the month of April showed the annual rate of increase was due to rises across all the broad food categories Stats NZ measures.

Grocery food prices were up 14%, fruit and vegetables were up 22.5%, restaurant meals and ready-to-eat meals were up 9%, meat, poultry, and fish prices increased by 9.5% and non-alcoholic beverage prices were up 8%.

Increasing prices for barn or cage-raised eggs, potato chips, and six-pack yoghurt were the largest drivers within grocery food, which were the same drivers for grocery prices last month.

“The squeeze on household budgets from the rising cost of living is continuing unabated at this point,” Kiernan said.

The second-largest contributor to the annual movement was fruit and vegetables. The increase was driven by tomatoes, avocados, and potatoes.

Monthly food prices rose 0.5% in April 2023 compared with March 2023. After adjusting for seasonal effects, they were up 0.8%.

Restaurant meals and ready-to-eat food increased by 1.7% and were the largest contributor to the monthly food price increase, which was the largest monthly increase seen since 1991.

Higher prices for dining out and takeaway coffee drove the increase in restaurant meals and ready-to-eat food.

“The 7.2% increase in the minimum wage, coming on top of underlying price pressures as food prices rise, is likely to have been the key driver of this lift,” Kiernan said.

He said the best news was that fruit and vegetable prices had declined 2.9% from March to April, as some of the immediate effects of the weather events started to dissipate on prices.

“Even so, annual price inflation in this category has been stable over the last three months, at 22% to 23% a year,” he said.

ASB senior economist Mark Smith said it was his team’s hope that annual food price inflation had peaked, or was close to it, given lower global food commodity prices.

“Price rises were widespread and remained elevated,” he said, as about 69% of items rose in April.

”Conditions are in place that should see NZ food price inflation cool over 2023, but a difficult year lies ahead for NZ consumers.

“However, the risk is that the current upward momentum in food prices takes longer to slow,” he said.

Restaurant Association chief executive Marisa Bidois said restaurants were being hit by both labour and food price increases with more to come.

“Customers like certainty, so businesses are trying to lock in food prices for the coming months to avoid fluctuations in pricing. This means working closely with suppliers and focused menu planning – however we are finding that with the current price volatility suppliers are reluctant to lock in prices.”

Diners could also expect to see reductions in the number of items on a menu.

“With cost of living going up, hospitality venues are conscious that there may be some slowing of trade and are trying as much as they can to keep pricing under control.”