Food prices rose higher than expected in January, with the strength of fruit and vegetable prices leading the increase.
Fresh milk prices reached their highest level on record, 0.5% higher than the previous record in November.
Food prices rose 1.8% in January with a 7.4% lift in the price of fruit and vegetables making up about half the overall increase, Statistics New Zealand (SNZ) said.
For the year to January, food prices are up 3.9%, including the impact of the GST rise in October. Grocery food rose 3.9% over the year, with fruit and vegetables up 8.1%, restaurant meals and ready-to-eat food up 4.1%, meat, poultry and fish up 1.6%, and non-alcoholic beverages lifting 1.1%.
Lettuce was 95.4% higher over the year, with fresh milk up 9.3% and potatoes up 35.2%, while tomatoes dropped 16.5%.
The 1.8% rise in food prices last month came after falls of 0.8% in December and 0.6% in November.
Fruit prices were showing their typical seasonal rise, while vegetable prices remained above usual for this time of year, SNZ said.
"Although lettuce prices usually rise at this time of the year, unusual weather conditions have contributed to prices being about 75% higher than the average January level over the past 10 years.
"Potato prices usually fall in January. However, reduced supplies of potatoes due to disease have contributed to higher prices in January 2011," SNZ said.
ASB economist Christina Leung said international wheat and dairy prices showed signs of flowing through to higher grocery prices in January.
"We expect the strength in international commodity prices will continue to underpin higher prices for bread and dairy products at the retail level over the coming months."
The effects of higher international commodity prices were also reflected in a 1.7% increase in meat prices in January. International lamb prices had increased 35% and beef prices 31% in New Zealand dollar terms over the past year. she said.
The price of restaurant meals and takeaways edged higher, partly due to the recent recovery in wage inflation, given the dominance of labour as an input cost in that category.
Ms Leung expected continued strength in food prices in coming months, underpinned by higher international commodity prices and the effects of recent floods in Australia on fruit and vegetable crops.
"While the annual growth in food prices at 3.9% is well below the double-digit growth seen over late 2008, food prices will be a key factor to watch over 2011."
