13 Sep 2011

Food prices drop for first time this year

12:35 pm on 13 September 2011

Food prices fell in August, the first monthly fall this year.

Statistics New Zealand says prices dropped 1.3% last month.

Prices for four of the five food groups measured fell.

Fruit and vegetable prices dropped the most, ending the month down 5.9%, reflecting lower prices for tomatoes (down 25%), bananas (down 21%) and lettuces. The price of bananas has tumbled to a five-year low.

Despite the fall, food prices are 6.6% higher than a year ago, down from an annual increase of 7.9% in July.

ASB economist Jane Turner says the falls reflect seasonal factors, including a recovery in production in Australia after floods.

She says weak wage growth may also be constraining food retailers' ability to increase prices.

The Council of Trade Unions says annual increase in food prices remains well ahead of the 2% increase in wages.