Food prices rise 1.9% annually as restaurant meals lead increases

Food prices lifted slightly month-on-month while international airfares and fuel prices rose sharply again, according to Stats NZ. 

Food prices rose 1.9% in the year to August, up from 1.9% in the year to July. 

Food prices lifted 0.3% monthly. 

Almost all food groups rose between July 2025 and July 2026, except the fruit and vegetables subcategory, where prices fell 1.6% annually but were flat month-on-month. 

Stats NZ prices and deflators spokesperson Nicola Growden said it was the largest annual price decrease in the fruit and vegetables group since March 2025. 

The largest contributor to the annual increase in food prices was the restaurant meals and ready-to-eat food group, up 3.2% annually and 0.3% monthly. 

This was followed by the grocery food group, up 1.7% annually and 0.3% monthly. 

In the year ended August 2026, prices increased for potatoes, standard 2-litre milk, dine-in lunch/brunch, and takeaway coffee. 

Prices decreased for tomatoes and fresh eggs. 

Monthly price increases were recorded for tomatoes, chicken pieces, onions and hamburgers. 

Prices fell for strawberries, cucumbers, large soft-drink bottles, and avocados. 

The meat, poultry and fish category picked back up after a decrease in June, with prices lifting 1.7% monthly and 3.4% annually. 

The non-alcoholic beverages category was the only category to fall monthly, down 1.4%, but remained up 1.5% annually. 

Prices for alcoholic beverages reversed last month’s gains, increasing 0.5% monthly and 1.3% annually. 

Prices for cigarettes and tobacco increased 0.2% monthly and 6% annually. 

Mark Smith, senior economist at ASB Bank, said underlying price pressures look to be firming. Photo / Supplied 

ASB Bank senior economist Mark Smith said annual consumers price index (CPI) inflation is likely to end the year above 4%. 

“Today’s figures and the recent climb in oil prices suggest that annual CPI inflation will hold up by more than expected over the remainder of 2026. 

“We expect annual CPI inflation to come in at 4% for the third quarter and to end this year at 4.2%, marking the sixth consecutive quarter that CPI inflation been at, or above 3%,” Smith said. 

“There remains a tug-o-war between cost pressures and economic spare capacity in influencing the core inflation trajectory, but at present higher costs appear to be winning.” 

Smith said ASB now expects annual inflation to remain high over 2027, with the soonest it could return to between the 1-3% band now in the second quarter of next year. 

He said a prolonged period of high inflation was a major headache for the Reserve Bank as it risks pushing inflation expectations and other nominal anchors higher. 

“There are two-sided risks to our Official Cash Rate (OCR) view, but the balance is tilted to a higher OCR over 2027.” 

Rent, transport and utilities 

Existing rent prices, known as the stock measure of rental property, were flat annually and monthly in August. 

The flow measure, which indicates prices for new rentals or tenancies in the market, was up 0.9% annually but also flat month-to-month. 

Electricity and gas prices were mixed, with electricity down 0.1% month on month but up 9% year on year. 

Gas prices rose 11% annually and 0.4% monthly. 

Petrol prices returned to growth after several months of decline, up 2% month-to-month and 17.9% annually. 

Diesel prices followed suit, up 8.6% monthly and 45.8% year on year. 

Transport and accommodation 

Prices for domestic air transport fell markedly in August, down 10.9% monthly but still up 6.5% year on year. 

International air transport prices lifted, rising 4.3% monthly. This follows a 10.9% monthly increase in July 2026. 

Growden said the monthly rise in international airfares was driven primarily by higher fares to Europe and Asia. 

International airfares are up 21.5% annually, the largest annual increase since April 2023. 

“Because we collect some international airfare prices around four months in advance, price changes that occurred earlier in the year for travel in August are now being reflected,” Growden said. 

Domestic accommodation prices were down 0.3% annually and 5.5% monthly, with international accommodation prices down 3.8% annually and 6.3% monthly. 

Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.