Food prices rose 1 percent in May month-on-month, with milk the single biggest driver. Annual food price inflation is running at 3.6 percent, while rents are at record-low increases of 0.3 percent a year.
Food prices rose 1 percent in May compared with April, with the price of a 2-litre bottle of milk the single biggest contributor to the monthly increase, according to Stats NZ data released this week.
The cost of a typical 2L bottle of milk was $4.57 in May last year but has since risen to $5.06. Meat, poultry and fish prices were up 6.9 percent over the year, and bread prices rose sharply month-on-month, as RNZ reported.
All major food groups recorded price increases over the 12 months to May 2026. The annual food price inflation rate now sits at 3.6 percent, up from 2.6 percent in the 12 months to April.
Why milk prices are rising now
ASB senior economist Mark Smith said retail milk prices in New Zealand typically follow global commodity market movements with a six- to nine-month lag. The increases being felt at the checkout now reflect global dairy price movements from earlier in the year. Higher fertiliser prices could push food costs higher still, though the full effect is not yet clear.
BNZ chief economist Mike Jones said food price inflation had settled at an annual rate of between 2.5 and 3.5 percent, after a period when it was running closer to 5 percent a year. His forecast expects the rate to remain in that range in the short term, with typical seasonal bumps through winter for fruit, vegetables and meat.
Electricity prices were up 12 percent over the year and gas up 10 percent, compounding cost pressures for households. But weaker demand is limiting the extent to which cost increases are passing through to retail prices. Diesel prices fell around 10 percent over the month and petrol fell 4 percent, reflecting the softening in global oil markets following news of a de-escalation in the Middle East.
Rents at record-low increases
One offset for renters is that rent inflation has slowed dramatically. Both the stock and flow measures of rent fell in the month, and the annual increase for existing rental stock was just 0.3 percent — described by Smith as a record low. That compares with annual rent increases of 5 percent or more seen in recent years, per interest.co.nz's housing market reporting.
BNZ's Jones said his forecast for overall consumer price index inflation was unchanged at an annual rate of around 4 percent in the next update, with CPI expected to ease to approximately 3.5 percent by year end.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.