Food prices fell 0.6 per cent in October, Statistics New Zealand said today, reflecting seasonally lower prices for vegetables, partly countered by higher grocery food prices.

"Lower food prices in October mainly reflected cheaper vegetables," said prices manager Chris Pike. "Tomato, lettuce, capsicum, and broccoli prices all fell, as they usually do at this time of year."

Two of the five food subgroups contributed to the fall in the food price index (FPI): fruit and vegetables - down 5.5 per cent and restaurant meals and ready-to-eat food, which also fell 0.5 per cent.

The key individual fall in October came from seasonally lower prices for tomatoes, which fell 32 per cent).


Prices were also lower for lettuce, chocolate biscuits and capsicum.

Prices were higher for soft drinks, carrots, plain biscuits, sweets, pumpkin, and potatoes. Carrot prices were up 29 per cent.

Statistics NZ said that food prices were up 0.3 per cent for the year to October 2012, which came after five consecutive annual decreases.

The key annual increases were tomatoes, which were up 61 per cent, from $5.15 to $8.29 per kilogram) and kumara, which was up 93 per cent.

Higher prices were also recorded for avocados, pumpkin, soft drinks, and chicken pieces.

The key annual decreases were fresh milk, which was down 9.5 per cent and butter, which fell 28 per cent.

Statistics NZ said last month that New Zealand's annual inflation rate had fallen to 0.8 per cent, as the high dollar depressed prices for imports and exportable goods.

The consumers price index (CPI) rose a weaker-than-expected 0.3 per cent in the September quarter, pulling the annual inflation rate to its lowest since December 1999.

ASB senior economist Jane Turner said fruit and vegetable prices were now 8 per cent higher than a year ago.

This reflected higher prices for kumara, with this year's crop affected by poor weather conditions in both planting and harvesting seasons. In addition, avocado prices were also up strongly on year-ago levels.

Grocery food prices lifted 0.5 per cent in October, following a steady decline over the past 6 months. A large driver of the recent decline in grocery food prices had been lower dairy prices reflecting easing global prices over the past year.

Turner said she expected further declines at the retail level to be limited.

Global dairy prices had since stabilised following the US drought, and there was the potential for recovery in global dairy prices over the coming year.

Subdued wage inflation pressures had contributed to lower food prices in the restaurant/takeaway sector.

"Over the coming year, we expect food prices to grow modestly and start contributing positively to CPI inflation. Fruit and vegetable prices are currently up on year-ago levels. In addition, there has been a lift in other food commodity prices (such as dairy and meat) as a result of the US drought which is likely to eventually flow through to the retail level over 2013," said Turner.