The tough times for NZ households hit home this week when latest official figures showed food prices had risen 7.6% over the year, with some staples rising faster: bread up 19.6%, cheddar cheese up nearly 60%, butter up 89.4%, and fresh milk up 10.2%. Households spend $38 out of every $100 of the food budget and grocery food, and this subgroup rose 11.2%.

While economists are predicting dairy commodity prices are past their peak, it is unlikely there will be any significant downward movement in the grocery budget. The falling exchange rate is expected to keep the cost of imported foods on a plateau. On the external front, despite a huge rise in export receipts (merchandise exports were valued at $3.4bn in July, which were nearly 30% higher than in July a year ago), the country saw the trade deficit for the month rise to $781m.

Imports are not falling off as quickly as expected and economists say the growth in import values was stronger than they predicted given the outlook for consumer and business spending. Imports of oil and non-oil intermediates continue to be boosted by surging prices, rising 40% and 35.3% year-on-year respectively.

How fast these will slow in the coming months may be a key to whether the deficit will shrink substantially or not. The two positive points in the trade figures were the 528% rise in crude oil exports to $316m and the plant and machinery imports which rose 14%.

 Copyright © Trans Tasman Media Ltd