Food prices jump in August

New Zealand food prices posted their biggest monthly increase in at least three years in August as produce and grocery items got more expensive.

Food price increased a seasonally adjusted 1.2 percent in August, snapping three months of cheaper goods, and led higher by a 1.7 percent rise in fruit and vegetable prices, Statistics New Zealand said.

The monthly spike in produce prices was driven by seasonally higher prices for tomatoes, lettuce and cabbage, while banana prices climbed 22 percent to a record high. Grocery food prices also rose a seasonally adjusted 1.2 percent as cheese and snack foods got more expensive.

On an unadjusted basis, food prices advanced 0.5 percent in August from the same month a year earlier, the biggest annual increase since April, as dearer capsicums, onions and courgettes lifted vegetable prices 2.6 percent and restaurant and ready-to-eat meal prices rose 2 percent. Grocery food was cheaper than August 2015, falling 0.5 percent as the slump in global dairy prices helped push down the price of domestic fresh milk and yoghurt.

Woolworths-owned Countdown yesterday said prices for its most commonly bought items fell 0.6 percent in August from the same month a year earlier due to cheaper milk prices. Bad weather created shortages for produce which pushed up prices, while the spike in banana prices came when a ship transporting the fruit to New Zealand broke down leaving a temporary gap in supply, the supermarket operator said.

The food price index accounts for about 19 percent of the consumers price index, which is the Reserve Bank's mandated inflation target when setting interest rates. Consumer prices rose an annual 0.4 percent in the June quarter, the seventh quarter below the Reserve Bank's 1-to-3 percent target band. Governor Graeme Wheeler has been grappling with a strong kiwi dollar making imports cheaper, while at the same time trying to avoid cutting rates too low for fear of inflaming an already hot property market.

Today's data show meat, poultry and fish prices fell 0.2 percent in August from a year earlier, led lower by an 11 percent drop in the price of poultry, while non-alcoholic beverage prices were unchanged from August 2015.

By Paul McBeth

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