Food prices remain high with 12.1% annual increase

Wednesday, 14 June 2023

Food prices were 12.1% higher in May 2023 than they were in May 2022, according to figures released by Stats NZ.

And although the rate of increase had slightly eased from 12.5% in April, this was largely down to a drop in fruit and vegetable prices that were high due to severe weather events affecting crops, Infometrics chief forecaster Gareth Kiernan said.

May’s annual increase was due to rises across all the broad food categories Stats NZ measures.

Grocery food prices increased by 12.7%, fruit and vegetables prices increased by 18.4%, restaurant meals and ready-to-eat food prices increased by 8.7% and meat, poultry, and fish prices increased by 11.7%.

Non-alcoholic beverage prices increased by 11.6%

Consumer prices manager James Mitchell said increasing prices for fresh eggs, potato chips and lollies were the largest drivers within grocery food.

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

Monthly food prices rose 0.3% in May 2023 compared with April 2023. After adjusting for seasonal effects, they were up 0.5%.

'Prices for non-alcoholic beverages such as soft drinks, energy drinks, and bottled water increased 4.5% in May, contributing the most to the overall monthly rise,' Mitchell said.

'Decreasing prices for fruit and vegetables such as tomatoes, mandarins, and kiwifruit mostly offset the non-alcoholic beverages movement.'

Kiernan said signals around underlying pressures were mixed, with grocery prices slightly down in May, and the annual growth rate easing from 14% to 12.7% per annum.

But inflation for food excluding fresh fruit and vegetables accelerated to a new post-1994 record high, with non-alcoholic beverage prices rising at their fastest on record, and meat, poultry, and fish prices rising at their fastest since 2009.

Kiernan said supplier costs had also begun to ease.

“We would typically expect the change in trend to take a couple of months to flow through into the retail prices paid by consumers, so we anticipate that there could be a moderation in broader food price inflation start to show through in the data in July or August.

“However, we are also cautious about the effects that the return to higher road user charges could have on freight costs from next month, which could lead to another round of price rises across many goods and services, including food, later this year.”

The high food inflation comes at a time when supermarkets are dealing with high levels of retail crime.

Foodstuffs, which owns New World and Pak’nSave, said there had been a 40% increase in retail crime in the February to April quarter this year compared to last.

That included 2541 incidents that were related to shoplifting, 254 incidents involved a trespass order being breached and 81 incidents of disorderly conduct.

Premium cuts of meat, and high value health and beauty products were the most targeted items for theft.

But Retail NZ chief executive Greg Harford said high food prices weren’t to blame.

”We don't believe there's any connection. The upwards trend in crime long predates the inflationary period - and has been getting worse for several years. We're also saying the same crime issues right across the sector, not just in grocery,” he said.

“The reality is that criminals are active right across the retail sector, and they are often stealing high-value goods, either to order or for the purposes of illegally re-selling them.”

Dr Murat Ungor of Otago University’s department of economics said New Zealand was not the only country battling high food inflation.

In the UK, the Office for National Statistics (ONS) said the CPI rose by 8.7% in the 12 months to April 2023, down from 10.1% in March.