Food prices rise at slowest rate since 2021

Thursday, 18 January 2024

Food prices rose at their slowest rate since December 2021 last month, Stats NZ said.

Prices were up 4.8% year-on-year, a much slower rate of increase than the nearly 13% recorded in the middle of last year.

Compared to December 2022, restaurant meals and ready-to-eat foods were up 7.1%, grocery food was up 5.4%, non-alcoholic beverages up 5.5%, meat, poultry and fish up 2.3% and fruit and vegetables up 1.5%.

Compared to November, prices were down 0.1%.

Foodstuffs, which operates Pak’n Save and New World supermarkets, said shoppers paid less for cheese, butter and icecream at its shops in December than a year earlier, as well as vegetables.

Managing director Chris Quin said it was a good way to end the year.

He said prices for courgettes and tomatoes dropped by 52% and 43%, respectively, while avocados were down 38% and capsicums down 31%. Other double-digit price declines included celery, broccoli, cauliflower, cucumber and lettuce. Two-litre tubs of icecream were down 15% on average.

“It bodes well for 2024, with experts widely predicting inflation to fall further, but that optimism should be tempered by the risk of geopolitical tensions once again disrupting supply, as is now happening in the Middle East.

“We’re seeing increases in shipping costs due to the longer voyage times, but to date we haven’t seen an impact on stock levels because the time it takes to bring goods in from Europe and North Africa is longer than the time this crisis has been having a notable impact on freight,” Quin said.

“Our teams are busy placing orders to replenish stock earlier than usual, to pre-empt potential supply gaps. This will mean extra storage and capital costs for us, on top of the extra freight charges – but we currently have no plan to pass those on, as they’ll hopefully be short-lived.”

Earlier in the week, data from Foodstuffs showed a 4.5% increase in supplier costs compared to December 2022.

“Although costs are higher than a year ago, the index in December was unchanged month-on-month from November 2023 as a result of the usual summer cost change moratorium on most items,” said Infometrics chief executive Brad Olsen.

Moratoriums are used by many companies and industries to minimise system changes and protect trading for customers over the holiday period.

But he said, despite the unchanged index, more items rose in cost than usual for a December month, and these increases were of a larger magnitude compared to in 2019 and 2020.

“Just over 1900 items increased in cost this December—far less than the 5200-plus monthly increases seen on average in the rest of 2023, as a result of the moratorium, but still considerably higher than the 370 items that rose in cost in December 2020. The more limited number of cost increases skewed higher this year too, with 18% of changes being a rise of more than 20%—compared to 12% increasing by this magnitude in December 2020.”

Olsen said there could be challenges for the continued easing of food prices.

“Although a number of input price indicators support the likely continued moderation in supplier cost increases in 2024, the recent spike in shipping costs risks re-inflaming supply chain concerns globally.”