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Give us this day our daily ... price increase

NZPA

Wednesday 13th July 2011

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Statisticians counting the cost of householders' daily bread purchases say that they are reviewing the staple's importance in the shopping "basket" which underpins the food segment of the consumer price index (CPI).

They are also looking at whether economic recession and the recent fashion for baking shows on television has triggered a surge in home-made bread supplanting the factory-made product sold in supermarkets.

"We're reviewing the food price index basket and the relative importance of what's in the basket," Statistics New Zealand's prices manager Chris Pike said.

The statisticians were looking at a three-yearly household spending survey done in the year to June 2010.

Compared with the previous survey, there had been "quite a pick-up" in spending on flour, the key bread ingredient.

Pike said households spent $38 million in 2007 on flour and flour-based mixes -- such as those used in electric breadmakers -- but in 2010 they spent $63.5m.

The $63m included $11m on flour-based mixes, and $36m on plain flour.

"When we release the updated food price index in about a month, the relative importance of flour will reflect that pick-up in spending," he said.

In 1949, flour made up 0.8 percent of household food costs, and since then its weighting in the "basket" had drifted down to 0.6 percent in the 1980s, and it dropped 0.3 percent in 2006 and 2007, and lifted to 0.4 percent in 2008.

"But there are reports of home baking becoming more common as food prices increase quite strongly," said Pike.

The bread prices covered by the CPI jumped to their highest level in the March 2011 quarter.

They were boosted by the lift in GST to 15 percent last October, and by a jump in grain prices triggered by bad weather affecting crops in wheat-growing countries, such as Russia.

Since Australian companies took over most of the nation's flour mills over the past three decades, much of the bread made in New Zealand has been made from imported wheat.

When the CPI of consumer goods was started in 1914, the average price of a 907g loaf was just under 4 pence, which is equivalent to about $2.40 today after allowing for general food price inflation. A "cost of living" study at the time gauged a typical household consumed seven loaves a week, meaning bread made up about 10 percent a household’s weekly food budget.

Bread prices dropped -- relative to overall food prices -- between 1923 and 1954, when the price of 7.5 pence for a loaf was equivalent to about $1.45 in today's money, after allowing for food price inflation.

Over time, the types of bread in the CPI survey have been altered to reflect changes in variety, size and packaging, though until 1965 only white bread was tracked.

The CPI basket was expanded to include wholemeal bread (1980), wholegrain bread (1989), and bread rolls (1993) . From a weighting of 4.7 percent on household spending on food in 1949, bread shrank to 2.89 percent in 1965, then lifted to 5.46 percent in 1993, and since 2002 has been just over 4 percent.

Since 1981, bread prices have risen more strongly than food prices overall lifting 443 percent during the 30 years to March 2011, while overall food prices rose only 280 percent overall, with annual average rates of increase of 5.8 percent for bread and 4.5 percent for food overall.

Between 1985 and 1990, bread prices grew by an average of about 11 percent a year and by 1990, bread prices were 71 percent higher than in 1985, partly helped by the introduction of a 10 percent GST in 1986 and its increase to 12.5 percent in 1989 .

Bread prices rose steeply over the 21 months to June 2009, jumping by almost a third as international grain prices rose sharply, partly due to higher demand, and shorter supplies as more grain was used overseas to make biofuels.



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