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NZ food prices rise 1.3% in January, on spike in apples, kiwifruit, vegetables

New Zealand food prices rose in January, as a smaller, later apple crop drove prices for the fruit to the highest in 16 years, while kiwifruit, strawberries, tomatoes and lettuces all rose.

The food price index increased 1.3 percent in January after a 0.3 percent gain in December, according to Statistics New Zealand. Prices gained 1.2 percent from January 2014, again led by fruit and vegetables.

Prices of fruit and vegetables rose 8.3 percent and typically record a seasonal rise in January but this year the effect was exacerbated by unfavourable weather, the government statistician said. Apples rose to an average $4.77 a kilogram last month, the highest since the series began in 1999, from $4.20/kg a year earlier, as a cooler spring slowed the crop, while hail before and after Christmas reduced the volume. It was too early to assess the impact of drought-like conditions in parts of the South and North islands on food prices, a spokeswoman said.

The Reserve Bank has said monetary policy will remain in neutral, given headline inflation is weaker than it expected, while warning last month that inflation could turn negative before returning to its target band.

"The January food price index was slightly stronger than expected," said Jane Turner, senior economist at ASB. "However, annual food price inflation remains soft, reflecting the subdued nature of the broader inflation environment."

Fruit prices alone climbed 11 percent in January. Grocery prices gained 0.6 percent, led by confectionery, nuts, and snacks, while bread and cereals also rose.

Meat, poultry and fish prices climbed 0.5 percent, led by an 8.1 percent gain for lamb, while chicken fell 2.8 percent. Restaurant meals and ready-to-eat food prices edged up 0.1 percent. Non-alcoholic drinks fell 0.4 percent, reflecting discounting of energy drinks and coffee.

Food prices make up 19 percent of the broader consumers price index (CPI), a measure of inflation compiled by the national statistician.