Recent data from Statistics NZ suggests a notable shift in the food price landscape. While the 4.8 per cent inflation rate remains outside the target range of 1 per cent to 3 per cent, it still marks a significant improvement from the peak level of 12.5 per cent earlier in 2023.
Monthly food prices, adjusted seasonally, registered a modest 0.1 per cent decrease in December 2023 compared to November 2023. Non-alcoholic beverages, particularly fizzy drinks and energy drinks, played a significant role in driving this fall. Other contributors to the monthly decrease included items like tomatoes, nectarines, and lamb.
Stats NZ reported that in December 2023, 45 per cent of food items experienced a decrease in price, a notable increase from the 39 per cent recorded in December 2022. James Mitchell, Stat NZ’s consumers prices manager, highlighted the positive trend, stating that the recent changes in food prices are comparable to those observed prior to 2020.
Looking at the annual picture, the 4.8 per cent increase in food price inflation for December 2023 was influenced by price rises across the five broad food categories measured by Stats NZ. The categories, in order of their contribution to the overall movement, were restaurant meals and ready-to-eat food prices (increased 7.1 per cent), grocery food prices (increased 5.4 per cent), non-alcoholic beverage prices (increased 5.5 per cent), meat, poultry, and fish prices (increased 2.3 per cent), and fruit and vegetable prices (increased 1.5 per cent).
The release of food price data is now part of the new Selected Price Indexes (SPI) data series, which covers around 45 per cent of the Consumers Price Index. While not a replacement for the CPI, the SPI aims to provide more timely inflation information. It replaces the separate monthly releases for food prices and rents, and additional monthly indexes for petrol and diesel, alcohol and tobacco, airfares, and accommodation will be published.
While the decline in food prices brings positive news, the broader economic landscape reveals challenges. Stats NZ’s separate data release indicates a staggering 42 per cent increase in international airfares in December, with domestic airfares rising by 6.9 per cent. These figures, however, are deemed seasonal.
Of concern to the Reserve Bank, rent inflation is on the rise again. In December, the ‘flow’ rate measuring the cost of new tenancies rose by 1.4 per cent, the highest increase since March 2023. The ‘stock’ rate measuring the cost of existing tenancies increased by 0.5 per cent, the highest rate since July. Annual increases for both ‘flow’ and ‘stock’ rates surpassed the Reserve Bank’s 1 per cent to 3 per cent general inflation target, posing challenges for inflation control strategies.
As New Zealand navigates these economic dynamics, attention turns to the Reserve Bank’s actions and potential adjustments to address the multifaceted challenges in the inflation landscape.
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