It's finally good news at the checkout - food prices are falling flat

Wednesday, 3 July 2024

Relief at the checkout is finally here as food prices expected to ease.

Stats NZ data showed that food prices in New Zealand increased just 0.2% in the 12 months to May 2024.

It’s the smallest increase since September 2018.

Relief could finally be here as food prices are expected to continue to remain flat, if not decline, throughout the rest of the year.

Stats NZ data showed that food prices in New Zealand increased just 0.2% in the 12 months to May 2024, the smallest increase since September 2018. Food prices fell 0.2% in May 2024 compared with April 2024, following a 0.6% increase the previous month.

ASB senior economist Mark Smith said food inflation had gone flat since a year ago and there were a number of driving factors including a considerable cooling in fruit and vegetable prices, a drop in global commodity food prices, a weak consumer environment and a lower minimum wage increase than unusual.

ASB senior economist Mark Smith says food price inflation is falling flat.

“So what we’re looking at is food prices are expected to be flat in the third quarter and that will be the lowest in about three years.

“Product pressures have come off from a number of angles and they’re also pointing to sharpening lower food price inflation.”

Fruit and vegetable prices were likely to pick up in the coming months, which was seasonal.

Aaron Beck, former Stats NZ senior manager for pricing, social and population insights, explains the food price index.

“But we will see food prices be lower than what they were a year ago.”

It would be a huge relief for households who had been battling a “huge headwind” thanks to the cost of living, he said.

“We start to see sign of light there and pressure is coming off.

Raewyn Bleakley, chief executive of NZ Food & Grocery Council.

“A lot of the Covid premium is now unwinding so that’s going to contribute to inflation sharply cooling in the second half of this year.”

Raewyn Bleakley, New Zealand Food & Grocery Council chief executive, said although the council expected food price rises to be “decelerating” there was still “some way to go”.

“Food prices will continue to be impacted by fluctuations in global commodity prices, geopolitical impacts, changes in supply due to weather conditions or export demands, and variations in the New Zealand dollar's value.”

The cost of shipping goods to New Zealand also remained high with shortage of ships globally and the cost of freight, she said.

“The challenge of ongoing weather events puts pressure on prices of fresh produce, which also flow through to the price of canned and frozen products.

“Suppliers have done their best to absorb rising prices, but they can only continue to do this for so long. Additional costs combine to put extra pressure on businesses, which are forced to pass them on at some point.”