New Zealand Food Price Inflation At 32-Year High

newzealand march23 19jan23 lt

New Zealand food prices increased at the fastest rate in more than three decades in December, data from Statistics New Zealand showed on Thursday, signaling strong inflationary pressures that would prompt the Reserve Bank of New Zealand to continue its interest rate hikes.

Food prices grew 11.3 percent in December, following a 10.7 percent rise in November, data from Stats NZ showed Thursday. The latest growth was the biggest since April 1990, when food prices rose 11.4 percent.

Prices for grocery foods increased 11.0 percent annually in December, and those of fruit and vegetables gained 23.0 percent.

Prices for meat, poultry, and fish price advanced by 11.0 percent. Prices for restaurant meals and ready-to-eat food, and non-alcoholic beverages climbed by 7.8 percent and 7.3 percent, respectively.

"Increasing prices for cheddar cheese, barn or cage-raised eggs, and potato chips were the largest drivers within grocery food," Statistics NZ Consumer Prices Manager James Mitchell said.

On a monthly basis, food prices rose 1.1 percent in December, after remaining unchanged in November.

On a seasonally adjusted basis, food prices gained 1.1 percent in December, following a 1.0 percent rise in the prior month.

Read more: New Zealand Consumer Confidence At Record Low On Soaring Cost Of Living

Westpac NZ Senior Economist Satish Ranchhod estimated that consumer prices rose by 1.1 percent in the December quarter and annual inflation to ease to 6.9 percent.

The December quarter saw continued large increases in food prices and housing related costs, which were partially offset by falls in fuel prices, the economist said in a note on Thursday.

The quarterly CPI data is due on January 25.

Westpac NZ's forecast is lower than the RBNZ's last published projection.

A result in line with the Westpac forecast, while still high, would reduce the case for another jumbo-sized OCR hike from the Reserve Bank of New Zealand next month, Ranchhod added.

Read more: New Zealand To Enter Recession In 2023

Meanwhile, ASB Bank expects a 1.6 percent quarterly increase in the fourth quarter headline CPI, with annual hitting a fresh multi-decade high of 7.4 percent.

Sharply lower petrol prices mask widespread and increasing pricing pressures, with annual non-tradable and core inflation set to strengthen further, ASB Senior Economist Mark Smith said.

"The return of inflation to the 1-3% inflation target band is still not assured, so the least regret from the RBNZ still hinges on doing too little on OCR settings rather than too much," Smith said.

"We expect a further 125bps of OCR hikes in the coming months, including 75bps in February."

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