Price changes take time. As the Ukraine war drives up wheat prices now, we know that flour prices will follow soon after; this will eventually lead to bread prices climbing once current flour stocks are used up. The costs get passed on down the chain, but there are lags along the way.
Therefore, a more important measure of inflation than the Consumer Price Index (CPI) is the Producer Price Index (PPI). It measures the change in costs to producers today, which will flow through to consumers later.
Statistics NZ shows the CPI at 6.9 per cent; however, the PPI paints a different picture. Figures released on 19 May for the PPI inputs in the March 2022 quarter gave a 3.6 per cent rise over the December quarter – the worst since 2008. That is an annualised rate of 14.4 per cent – more than twice the CPI.
Capital goods (those used for production, such as machinery) had the highest price increase since records began in 1990, according to Statistics NZ manager Brian Downes, so worse is yet to come.
https://www.stats.govt.nz/news/producer-prices-increase-in-march-2022-quarter
Governments around the world are blaming Russia, but in the December quarter (before the war) the PPI rose a shocking 10.4 per cent annualised rate. The Covid money printing was already coming home to roost. It won’t be long before these costs start hitting everything you buy.