Dairy dominates annual food price rises

The price of cheese increased four per cent in the past 12 months. Photo / Dean Purcell.

Food prices rose 0.9 percent in the year to January, spurred by an 8.8 percent rise in the price of milk, 20 percent rise in butter prices, and a 4 percent increase for cheese, although dairy products saw price falls in the month of January.

Statistics New Zealand data released this morning shows food prices rose 1.2 percent last month, reflecting a 4.4 percent, seasonally induced increase in fresh produce prices, and offset by lower prices for milk, eggs and cheese.

Fruit prices in January rose 7.4 percent on December, driven largely by apples, strawberries, kiwifruit and mandarins. Vegetable prices rose 1.8 percent over the previous month.

Among grocery items, which were up 0.9 percent between December and January, contributors to the increase were a 1.5 percent rise in non-alcoholic beverage prices, a 0.8 percent increase in meat, poultry, and fish prices.

"The easing in global beef and lamb prices in more recent weeks suggests the higher retail meat prices may not be sustained," said ASB economist Christina Leung.

Restaurant and ready-to-eat food prices rose 0.1 percent in January and 1.7 percent over the previous 12 months, compared with 1.3 percent fall over 12 months in fresh produce prices, the only food sub-group to show a fall in the year to Jan 31.

Pumpkins, grapes, avocados, and pears showed the biggest falls.

"Recent inflation indicators point to a turnaround in broader inflation pressures. The RBNZ will be particularly mindful of the flow-through effects as construction activity gathers steam."

"We continue to expect the RBNZ to lift the OCR in March, with further increases beyond that likely to be gradual," an ASB statement said.