Falling fuel prices take edge off inflation data

Fuel price declines helped to keep inflation in check in a key measure for July, according to Stats NZ figures. Petrol prices dropped by 5.7% in June, while diesel prices fell by a more significant 12.1%, as global energy costs remained lower but were uncertain due to US-Iran tensions. This was the third consecutive month of falling fuel prices.

As a result, petrol and diesel are now priced below levels seen in March, although they still remain above their February levels, reported Stats NZ spokesperson Nicola Growden. Despite the recent decline, petrol is still 15.1% more expensive than a year ago, and diesel is nearly 35% more costly over the same period. Fuel prices account for around 4% of the broader inflation measure, the consumer price index (CPI).

Food prices, meanwhile, rose by 0.1% for the month to be 1.9% higher than a year ago, marking the lowest annual increase since December 2024. Fruit and vegetables drove the increase, primarily due to seasonal supply fluctuations, especially strawberries, cucumbers, and capsicums. However, this growth was offset by cheaper meat and poultry, as well as some grocery items like soft drinks.

Meat and poultry prices recorded their biggest monthly decline in over five years, noted Growden. The annual rate was driven by pricier takeaway meals, ready-to-eat food, milk, takeaway coffee, and certain bread. Food prices constitute about 19% of the CPI. Electricity, gas, and rents remained flat or slightly cheaper, helping to balance out higher domestic and international airfares and local commercial accommodation.

Domestic airfares increased by nearly 21% in June, the largest monthly rise in 11 years. These items account for approximately half of the CPI, which accelerated to a two-year high of 4.1% in the year ended June.