Food prices have slowest annual gain in nine months but dairy prices surge

Unfavourable weather dented dairy production leading to prices rising. Butter prices surged 43 per cent. Photo / 123RF

New Zealand food prices increased at a 0.8 per cent annual pace in January as dairy prices rose after unfavourable weather dented production.

That was the smallest annual increase since April 2017 when prices advanced 0.2 per cent, Statistics New Zealand said.

"Some dairy products and produce items were affected by adverse conditions during winter and spring," Stats NZ consumer prices manager Geoffrey Wong said. "This has contributed to higher prices over the past nine months."

Butter prices surged 43 per cent in the year to January, reaching their highest-ever level. The average price for the cheapest available 500g block of butter was $5.78 in January 2018, compared with $4.06 in January 2017, Stats NZ said.

Meanwhile, avocado and pumpkin prices more than doubled over the year. Avocados were at their highest price for a January month since 2004, with the average price of a 200g avocado $2.78 in January 2018, compared with $1.29 in January 2017.

"These higher annual prices for avocado and pumpkin were partly offset by lower prices for apples, tomatoes, and carrots," Wong said.

Compared with the previous month, January food prices were up 1.2 per cent with all five subgroups notching up increases from December, Stats NZ said. After seasonal adjustment, monthly food prices slipped 0.6 per cent.

Grocery food was the highest upwards contributor, rising 1.4 per cent, led by higher prices for bread, up 4 per cent, and chocolate, up 11 per cent. These rises were influenced by items coming off December specials, Stats NZ said.

Meat, poultry, and fish prices rose 2.4 per cent in January, to reach their highest level since January 2016. Beef prices were at their second-highest level since the series began. The price for 1kg of beef mince was $14.32 in January 2018, compared with $13.47 in December 2017.

The food price index accounts for about 19 per cent of the consumers price index, which is the Reserve Bank's mandated inflation target when setting interest rates.