Annual food price inflation has slowed to 0.7%pa, its smallest rate of increase in three years. On one hand, this makes me happy, as it reinforces other signals that more pieces of the inflationary puzzle are moving back down to within a 1-3%pa target band. But on the other hand, this concerns me.
Why on earth does a moderation to food pricing pressures concern me? Well it is because a big part of the decline has been driven by a weakening of fortunes for key export commodities.
The biggest contributor to the monthly fall was the fruit and vegetables group, driven by cheaper prices for kūmara, apples, and grapes.
The meat, poultry, and fish group also contributed to lower food prices, driven by cheaper prices for lamb, beef steaks, and bacon.
If the prices of these goods are falling, it’s not just households getting ahead at the supermarket we need to think of. These falling commodity prices are symbolic of squeezed incomes for many farmers, which in turn will reinforce the recessionary trends we are seeing in many parts of regional New Zealand.
I am a glass half full type, but this interpretation of the data does emphasize there are two sides to every tale!
