Food prices fell 0.9 per cent last month, reflecting lower prices for grocery food and seasonally lower prices for fruit and vegetables, Statistics New Zealand said today.
"Food prices fell in September, reflecting cheaper grocery food prices. Grocery food prices are now nearly 3 per cent cheaper than three months ago in June," prices manager Chris Pike said.
Three of the five subgroups contributed to the fall in the food price index: grocery food down 1.6 per cent, fruit and vegetables down 2.2 per cent, and non-alcoholic beverages down 0.5 per cent.
For the year to September 2012, food prices fell 0.3 per cent, marking the fifth consecutive annual fall in food prices.
ASB senior economist Jane Turner said the 1.6 per cent decline in grocery prices was unexpected.
"This appears to be led by discounting on plain biscuits, sweets and muesli bars. It's likely these prices will bounce back in October as promotional discounts end."
"We expect further downward pressure in grocery prices to be limited, as the US drought has resulted in a sharp spike in grains prices, which is likely to see a number of food commodity prices increase over the coming year (including meat and dairy)."
Turner said food price inflation had been subdued over the past year.
"Easing grocery prices due to lower prices for dairy have been a key driver for subdued food price inflation. In addition, inflation in restaurant meals and ready-to-eat food has also been very subdued, reflecting lower wage inflation pressures."
Turner said that over the coming year, she expected to see "less downward pressure" on food prices. The US drought had resulted in shortages of key grain crops, which would impact feed prices and prices of other related foods.
"We expect export prices for meat and dairy to recover over the coming year and, over time, these may result in higher retail prices."
In the yearly figures, grocery food fell 3.5 per cent, non-alcoholic beverages were down 1.3 per cent, and meat, poultry, and fish prices fell 0.8 per cent.
Fresh milk prices have fallen 9.2 per cent in the year, butter has slipped 30 per cent and cheddar cheese prices have fallen 15 per cent.
Higher prices were recorded for tomatoes - up 69 per cent from $7.23 to $12.26 per kilogram, kumara - up 90 per cent, broccoli up 36 per cent, and chicken pieces up 5 per cent.