Introduction
Bread has been included in the consumers price index (CPI) basket since the time series began in 1914. This article looks at how bread prices have changed during the past century.
Bread prices in the early days
In 1914, the average price of a 2 pound (lb) or 907 gram loaf was just under 4 pence, which is equivalent to about $2.40 in the March 2011 quarter after allowing for general food price inflation. In a ‘cost of living’ study undertaken at the time, it was assumed that a typical household consumed seven 2lb loaves each week. This meant that bread made up about one-tenth of a household’s weekly food budget in 1914.
Between 1923 and 1954, bread prices dropped relative to food prices overall. During this period, the price of a 2lb loaf remained between 5.5 and 7.5 pence, as shown in figure 1. The average price in 1923 was just over 6 pence. General food price inflation meant that nearly 14 pence would have been required in 1954 to buy the same amount of food as 6 pence in 1923. However, in 1954, 14 pence would have bought nearly two loaves of bread, as the average price at that time was 7.5 pence.
Figure 1
The price of 7.5 pence for a loaf in 1954 is equivalent to about $1.45 in the March 2011 quarter, after allowing for food price inflation.
Basket changes since 1955
Over time, bread became available in more varieties, sizes, and packaging. More types of bread were included in the CPI basket to reflect these changes. In 1955, when a 28oz (equal to 794 grams) loaf size had become more common, the standard size for bread used in the CPI changed from 2lb to 28oz.
Up until 1965 only one type of bread – white bread – had been tracked in the CPI. From 1965, three types were used to track prices: white bread (split, uncut standard loaf, 28oz), white bread (cut, wax-paper wrapped, 28oz), and white bread (non-standard loaf, cut, transparent wrapping paper, 1lb or 454 grams). In 1974, the 28oz sliced loaf was replaced by a 24oz (equal to 680 grams) sliced loaf and the 1lb loaf was replaced by a 16oz (equal to 454 grams) specialty loaf.
Since 1978, the weight of types of bread tracked in the CPI has been measured in grams. Wholemeal bread, wholegrain bread, and bread rolls were added to the CPI basket in 1980, 1989, and 1993, respectively. These three types, together with white bread, make up the current selection of breads in the CPI basket.
Over the years, the relative importance of bread in the CPI food group has experienced some changes, as shown in figure 2. Bread made up 4.70 percent of the CPI food group in 1949. This shrank to 2.89 percent in 1965. Bread’s relative importance rose to 5.46 percent in 1993. Since then, bread’s relative importance in the CPI food group decreased, but has remained at just over 4 percent since 2002.
Figure 2
Bread price rises since 1981
Since 1981, bread prices have risen more strongly than food prices overall, as figure 3 shows. Bread prices increased 443 percent during the 30-year period from the March 1981 quarter to the March 2011 quarter. During this time, food prices increased by 280 percent overall. The annual average rates of increase were 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 per year. By 1990, bread prices were 71 percent higher than in 1985. The introduction of a 10 percent goods and services tax (GST) in October 1986 and an increase in the rate of GST to 12.5 percent in July 1989 played a part in the increase in bread prices.
Bread prices rose steeply from the September 2007 quarter to the June 2009 quarter. In less than two years, bread prices jumped by almost one-third. The rise was influenced by higher international grain prices, which rose as a result of supply shortages, higher demand, and greater use of grain in biofuel production.
Figure 3
The CPI average retail prices of white bread (cheapest available brand in each outlet at the time of price collection), wholemeal bread, and wholegrain bread rose from $1.18, $2.33, and $2.89 in the September 2007 quarter to $1.80, $3.02, and $3.81 in the June 2009 quarter, respectively.
After a peak in the June 2009 quarter, bread prices eased slightly, but then rose again to reach their highest-ever level in the March 2011 quarter, influenced by an increase in GST to 15 percent in October 2010 and by another rise in international grain prices. The latest jump in grain prices was influenced by adverse weather affecting crop sizes in the main wheat-growing countries, such as Russia. Much of the bread made in New Zealand is made from imported wheat.
Back to Price Index News: July 2011