This will be a year of volatile prices for everything from consumer electronics to fresh veges. Aimee Shaw reports on the prices that are set to move most.

This article was first published on Stuff.

While the global outlook for the cost of goods remains cloudy, experts say some light at the end of tunnel is starting to gleam through for households that have been struggling with rising prices.

ASB senior economist Mark Smith said shipping and freight costs had come down, as had global oil prices and therefore fuel prices. The outlook for fuel prices, however, remained volatile.

By the end of 2023, Smith said, it was widely thought that the inflation rate would have dropped to just over 5%, from the current rate of 7.2%

“There were a bunch of pressures all going one way last year, from a retail perspective everything was going up, but this year we are expecting to see a bit more differentiation and things won’t increase to the same extent and others items will come down.

Here is a guide to where we could expect to see the most price movement this year.

Potatoes: Prices likely to increase

Smith said food prices had yet to come off the burner to the extent analysts had hoped, and consumers would continue to be faced with price increases on a wide range of food this year. This included domestically grown and made produce and groceries, as well as imported goods.

Potatoes New Zealand’s chief executive Chris Claridge said potatoes were one of a number of vegetables set to increase in price in the weeks ahead and through the year.

He said the wet weather and recent cyclone would have damaged some crops, which would push up prices.

”Over the next few months we will in all probability see price increases and that is due to the harvest of potatoes interrupted by these wet weather events, and storms do impact production in the North Island,” Claridge said. “The South Island harvest starts later in the year.”

Price rises could be seen as soon as in the next few weeks, he said.

“This will be short term and then things will likely start to stabilise in a few months, however, consumers should expect to pay more overall throughout the year. There is no escaping the inflationary pressures on the cost of vegetable production.”

Growers could not absorb the increasing costs they faced and shoppers could expect to pay 10% or more extra on potatoes in line with food price inflation, he said.

Anything powered by a computer chip: Prices likely to increase

Covid-19 lockdowns and disruption caused by the previous and recent factory shut downs in China, South Korea and Taiwan has caused manufacturing delays.

There has been a global computer chip shortage since 2021, which had caused an issue with supply for manufacturers and businesses using computer chips, including Ford, Cisco and retailers who sell consumer electronics.

In March last year it was forecast that the shortage was expected to persist for another 18 months through to at least August.

While a glut of computer chips is expected to flow through, up until now this has impacted manufacturing capability and reduced supply and therefore pushed up prices of electronics containing these chips.

Computer chips are used in almost all electronics, from smartphones, tablets, laptops, chargers, USB cables, hard drives, through to fridges, washing machines and cars.

Tech writer and commentator Juha Saarinen said the chip shortage had far-reaching impacts, including in New Zealand, and had significantly disrupted the supply of electronic goods.

He said there was no chance of price reductions this year as a result, and there was a risk of further price hikes if any geopolitical global events were to occur. China invading Taiwan would have dire impacts on the industry as one of the biggest producers.

The war in Ukraine had also contributed to the shortage as some of the raw materials used in computer chips were sourced from there, Saarinen said.

“Now that Covid is kind of in the background, and we’ve got a recession coming up, it is thought that supply will normalise, and we could relax and get all the chips, but that is not guaranteed at all.

“[The industry] is sitting and waiting to see when the next big thing happens and disrupts supply chains.”

Saarinen said backlogs of orders meant there would be little chance of bargains on electronics for the foreseeable future.

Smartphones, consumer appliances: Prices likely to increase

Demand for consumer electronics and appliances has come back from what it was 12 months ago, off the back of declining consumer confidence, tightening credit and the fact many people replaced goods or bought new gear over the past few years, First Retail Group managing director Chris Wilkinson said.

“All these goods are imported, and with freight and distribution costs remaining high, I don’t see these coming back [to earlier prices] any time soon.

“What we are seeing is retailers bringing new brands to the New Zealand market to create differentiation, broaden choice and achieve necessary ‘value’ price-points. We’ll likely see more of that in the future as stores look to re-engage and inspire shoppers with fresh and unique lines.”

Courgettes, other fresh produce: Prices likely to increase

A single courgette will set you back almost $2 at the moment, or $9 for a kilogram, and these prices are expected to creep higher.

Fresh fruit and vegetable prices are tipped to climb even higher this year, despite seasonal produce such as courgettes and lemons already being at new high prices.

Wilkinson, who tracks trends in the retail sector, said products that required high inputs such as labour, imported feed and fertiliser and those linked with high distribution costs, coupled with seasonal impacts such as uncertain weather patterns, would continue to climb in price.

These trends, particularly within food and groceries, were being seeing all around the world, he said.

The egg shortage is expected to continue in the months ahead, which could push prices up.

ANZ’s commodity price index shows dairy prices rose at the end of 2022, and farm cost inflation is high and will in part be passed on in higher prices and reduced supply.

Onions, corn, and apricots have also been items with shortages and therefore likely to command higher prices.

Clothing and apparel: Prices likely to decrease

High oil prices had increased the cost of clothing, footwear and apparel but with the pressures now off, that was a good signal for retail prices, said Smith.

“With shipping increases coming lower globally, import prices will then be lower and retailers might have to discount to get the sales they need.”

Smith anticipates shoppers will show less willingness to spend this year – in contrast to 2022’s record year of spending despite record high inflation.

According to Worldline figures, the country spent almost $36 billion last year – up up 13.6% on pre-pandemic levels from 2019; this is largely attributed to rising inflation.

“If you look at the driver of goods’ [prices] a lot of them are pointing down now,” said Smith.

But he warned these discretionary goods could also be subject to steep and rapid price increases due to their ties with external global factors, such as the exchange rate.

Wood, building supplies: Prices could decrease

Building materials such as wood, framing, cladding, windows and fixings could reduce slightly in price through the year.

Smith said construction costs and materials prices were extremely elevated last year and had already started to come down. Acute labour shortages could also impact prices.

Wilkinson, however, was not so hopeful for any price decreases.

“While supply chains for locally produced building materials are slowly freeing up, most construction products have some or all overseas-sourced composition and these are likely to continue to increase because of global demand and increased production and distribution costs,” he said.

“Imported product will continue to increase as suppliers pass on their increased costs. Changes in demand (such as if house building slows down) may be the only way locally produced building products (like framing, insulation and wallboards) may see prices come back from the peaks they are achieving currently, but I wouldn’t be holding my breath.”

Wilkinson said Covid was still impacting these supply chains and local productivity, and this was expected to have a flow-on effect on prices for consumers.