Food prices jumped 11.3% last year and economists appear unsure when they’ll stop rising steeply.
The jump in food prices in December, compared to December last year, was the biggest annual increase since April 1990, when food prices increased by 11.4%.
There was also no sign of price rises letting up towards the end of the year, with prices rising 1.1% in the month of December alone.
ASB senior economist Mark Smith said December food prices were slightly stronger than expected, with about 60% of items rising in price, and consumers were looking at ways to cut down their food bill.
“It is our hope that annual food price inflation has peaked, or is close to it, given lower global food commodity prices of late,” Smith said.
“Conditions are in place that should see New Zealand food price inflation cool over 2023, but a difficult year lies ahead for consumers.
“The risk is that the current upward momentum in food prices takes longer to slow.”
Infometrics principal economist Brad Olsen said that with recent poor weather and sustained inflationary pressures, there was still no relief on the horizon just yet.
“On a seasonally-adjusted basis, food prices have now increased by at least 1% a month for the last four months straight, and are up 6.9% in the last six months alone, indicating the continued pressure on prices,” he said.
Poor weather is likely to limit production and supply of produce in the coming months, putting even more pressure on production costs, he said.
“Due to the broader pricing pressures, healthy options and cheaper convenience options are all rising in price.”
The Infometrics-Foodstuffs NZ Grocery Supplier Cost Index released this week indicated that average supplier costs had risen 10.6% over the year to December, underscoring that higher input costs are hitting food producers who are having to pass on these higher costs, Olsen said.
Foodstuffs NZ managing director Chris Quin said local cost pressures were still present for everyone growing, manufacturing and retailing food in New Zealand.
“Domestically, input cost pressures are continuing for suppliers who are facing higher costs to grow, pick and pack produce for market, with adverse weather events still the wild card this year.”
It had been a tough summer so far for growing produce, and it was going to be a couple of weeks before the full impact of Cyclone Hale was known, he said.
“We’ve had to import more fresh produce than in previous years because we couldn’t buy it here in New Zealand, it just hasn’t been available locally. “
The annual increase in food prices was due to rises across the board.
But increasing prices for cheddar cheese, barn or cage-raised eggsand potato chips were the largest drivers.
The increase in egg prices came after the phasing out of caged eggs caused a shortage.
The second-largest contributor to the annual increase was fruit and vegetables, up 23%, in which kiwifruit, potatoes and tomatoes were the key drivers, Stats NZ consumer prices manager James Mitchell said.
Fruit and vegetables were the largest contributor to the monthly movement of food prices.
Once again, tomatoes, kiwifruit, and potatoes had the biggest impact on produce prices that month.
One kilogram of loose tomatoes cost $15.05 in August, rose to $18.32 in September, fell to $7.83 in October and slipped further this month to $5.71, a survey of nine Pak’n Save, Countdown and New World supermarkets showed.
The price of tomatoes rose nearly $4 between July and August aloneaccording to Stats NZ.
Restaurant meals and ready-to-eat food were up 7.8% over the year and meat, poultry, and fish were up 11%.
Stats NZ will report the overall inflation rate for the December quarter on Wednesday.
The Reserve Bank has been forecasting a rise in annual inflation to 7.5%, but BNZ has been tipping a slight decline to 7.1%.