Milk pulls up food prices - but rents barely move

12:51 pm today

Prices rose for milk and takeaway coffee, along with fruit and vegetables.

Photo: 123RF

Food prices jumped again in May, driven by an increase in the price of milk.

Stats NZ said food prices lifted 1 percent between April and May. The grocery food group was the biggest contributor, followed by fruit and vegetables.

Stats NZ spokesperson Nicola Growden said higher prices for a 2L bottle of milk were the biggest driver of the overall monthly increase.

In May last year, the typical cost of a 2L bottle of milk was $4.57 but it is now $5.06.

Mandarins, boxed chocolates and frozen desserts dropped in price between April and May.

Compared to a year earlier, prices were 3.6 percent higher, after a 2.6 percent increase in the 12 months to April.

All food groups recorded price increases between May 2025 and May 2026. Higher prices for the meat, poultry, and fish group, up 6.9 percent, was the largest contributor to the annual increase in food prices. This was followed by restaurant meals and ready-to-eat food, up 3.3 percent annually.

Price increases were recorded for milk, blocks of chocolate, white bread, and takeaway coffee.

Price decreases were recorded for tomatoes and olive oil.

ASB senior economist Mark Smith said some of the fruit and vegetable change was seasonal but meat prices were also up, led by lamb.

"Bread prices were up as well, quite sharply, to double digits for the month."

He said retail milk prices in New Zealand had a six- to nine-month lag from global market movements and that was starting to be felt now. Higher fertiliser prices could lead to more food price inflation but the extent was not yet clear.

BNZ chief economist Mike Jones said food price inflation had settled at an annual rate of between 2.5 percent and 3.5 percent after a period where it was near 5 percent a year ago.

"Our forecasts essentially bake in more of the same in the short-term, albeit with a few bumps in prices over the next few months reflecting typical winter increases in fruit and vegetable prices, and similar for meat prices following the strong gains we've seen for those in global commodity markets."

He said his forecast for overall inflation, as measured by the consumer price index, was unchanged at an annual rate of 4 percent in the next update.

Smith said electricity prices were pushing up sharply, up 12 percent over a year. Gas was up 10 percent.

"There are obvious pockets where high global energy prices will have a natural impact here."

But he said weaker demand was limiting the extent of price increases. Softening in fuel prices should continue given news of a deal in Iran.

"Diesel prices were down close to 10 percent for the month, petrol prices down close to 4 percent... more broadly things like accommodation, international travel did not move as much as expected.

"There are signs there are some cost increases on the horizon but for now they're not flying through into the retail level. That's encouraging from an inflation point of view.... we expect annual CPI inflation to peak at just over 4 percent in the second quarter of this year and fall to around 3.5 percent by the end of the year."

Increases in rents were at record lows, he said. Both the stock and flow measure fell in the month and rents for the stock of rental property only lifted 0.3 percent over a year.

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