Inflation On The Rise For New Zealand Households

Friday, 14 February 2025, 9:44 pm
Article: RNZ

Gyles Beckford, Business Editor

• Food prices +1.9 pct in January, annual rate 2.3 pct
• Chocolates, fresh produce, groceries push up food prices
• Tobacco and alcohol duties rise
• Soft NZ dollar raises import prices
• Consumer inflation gets unwelcome boost

A big price rise for sweet treats, sin taxes and a soft New Zealand dollar may be reigniting unwelcome inflation pressures for households.

Stats NZ's monthly food price index rose 1.9 percent in January on the month before, the highest monthly increase since mid-2022, and taking the annual rate to its highest in a year at 2.3 percent.

Higher prices were widespread, with about two-thirds of the goods in the food basket more expensive than a year ago.

"The proportion of the food basket that increased by over 5 percent in price was the highest in five years," Stats NZ prices spokesperson Nicola Growden said.

Higher prices for grocery food contributed the most to the January 2025 increase, with higher prices for boxed chocolates, milk and chocolate blocks.

"The average price of a 2-litre bottle of milk was $4.54 in January this year. In January last year, it was $3.93," she said.

The average price of a 250 gram block of chocolate was $5.72 in January 2025 compared with $4.90 in January 2024.

Chocolate and coffee prices world-wide had surged on the back of rising cocoa prices - caused by bad harvests because of weather and disease.

The usual rise in non-seasonal fruit and vegetables such as broccoli, apples and kiwifruit also occurred.

Grocery prices were also lifted by rises for dairy products and meat, reflecting the strong prices New Zealand products were getting on world markets.

And a sample of other prices for the month showed a 2.4 percent rise in alcohol and tobacco price after the annual rise in customs duties, with fuel and commercial accommodation higher - partly offset by cheaper airfares.

The surveyed prices accounted for about half of the consumer price index (CPI), the main inflation barometer.

Unwelcome headwinds

Economists were quick to note many of the rises were seasonal and would disappear, but also contained some warning signals.

"There is always a lot of noise in monthly prices. But as the first month of the quarter, January's figures set the base for the first quarter so should not be ignored," BNZ senior economist Doug Steel said.

He said the RBNZ would likely look through the volatility when it came to setting policy, but even so would remain alert.

"This broad trajectory fits with our thinking that there is more upside risk than downside to near term CPI inflation prints ... these things need to be monitored closely."

ASB senior economist Mark Smith looked at the weaker New Zealand dollar, which had fallen more than 5 percent over the past six months against the US dollar.

"The figures suggest that the lower NZ dollar is reigniting pricing pressures from a number of pockets."

He said the expected 50 basis point rate cut at next week's RBNZ monetary statement was safe, but data such as the raised questions about how far and fast the central bank might cut rates later in the year.

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