NZ food prices rise in July as takeout and restaurant meal prices push higher

Fruit and vegetables for sale at Harbourside market, Wellington. Photo by Lynn Grieveson

New Zealand's food prices rose in July, once again led by higher prices for takeout and restaurant meals and echoing strong activity in the hospitality sector in a separate indicator of services.

Statistics New Zealand said food prices rose 0.7 percent in July and 1.1 percent on the year, with the annual lift driven by a 3.2 percent jump in restaurant meals and ready-to-eat food prices. It was the largest annual increase since September 2011 and all items priced in this category increased in price during the year, Stats NZ said.

“Large seasonal changes in fruit and vegetable prices tend to lead monthly food price movements,” Stats NZ consumer prices manager Geraldine Duoba said. “But price increases for restaurant meals and ready-to-eat food have been consistent, and led annual food price inflation this year.”

Stats NZ had previously said that for every $100 that Kiwi households spend on food, about $26 goes on takeaways and eating out. That's in line with the Business NZ-BNZ performance of services index, also released today, which showed a recovery in services activity last month, supported by strength in accommodation, cafes and restaurants, which are typically linked with a healthy tourism industry.

The Stats NZ data show grocery food prices were flat on the year while milk, egg and cheese prices dipped 0.8 percent.

The monthly rise was largely driven by higher vegetable prices, which rose 9.2 percent. According to Stats NZ, lettuce prices jumped 77 percent on the month, tomato prices lifted 30 percent while broccoli prices rose 24 percent. The price of a 500g head of lettuce was $5.42 in July 2018, compared with $3.07 in June 2018, and $3.30 in July 2017, Stats NZ said.

“Lettuce prices are now at their highest since the series began, and 2.5 percent higher than their previous peak in May 2017,” Duoba said. “July was particularly cold and wet in the North Island where a lot of our lettuce is grown.”

A 7.9 percent fall in fruit prices partly offset the rise in vegetable prices.

According to Stats NZ, seasonally adjusted food prices lifted 0.6 percent on the month in July.

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.

Last week the central bank kept the official cash rate at 1.75 percent and said it expects to keep interest rates at stimulatory levels for longer, given tepid growth and inflation. The central bank is now forecasting a full rate hike by December 2020.