New Zealand food prices rose in September as dairy products continued to increase with butter prices hitting another record high.

The food price index advanced 0.5 per cent on a seasonally adjusted basis in the month, and gained 3 per cent for the year to September, Statistics New Zealand said. Fruit and vegetables cost 6.5 per cent more than a year earlier, while meat, poultry and fish prices rose 1.4 per cent and grocery food prices, which includes dairy, increased 3.7 per cent annually.

Butter prices hit a record high, with the cheapest 500-gram block available costing $5.55, up 3 per cent in the month and 60 per cent from a year earlier. Cheese prices rose 8.6 per cent while fresh milk prices were up 8 per cent on an annual basis, and yoghurt rose 7 per cent.

Consumers price index manager Matthew Haigh said that for every $100 spent on food, Kiwis spent about $10 on dairy products.

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Food prices account for about 19 per cent of the consumers price index, which is the Reserve Bank's mandated inflation target when setting interest rates. A spike in food prices and a recovery in oil prices earlier this year led to a jump in inflation, which has been subdued in recent years. However as those movements flatten out the pace of CPI increase is expected to slow in early 2018, the Reserve Bank has said.

Vegetable prices increased 6.5 per cent on an annual basis, driven by higher prices for kumara and potatoes, and rose 0.3 per cent in the month on a seasonally adjusted basis. Fruit prices rose 4.4 per cent annually and were up 0.7 per cent in the month.

The price of lamb jumped 15 per cent in the year to September 2017, while the price of chicken rose 4 per cent and pork dropped 4 per cent. Restaurant meals and ready-to-eat food prices rose 2.2 per cent on an annual basis.

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