Slower cost increase noted
The Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index (GSCI) reported a 2.9% annual increase in supplier costs to supermarkets as of May.
This marks a continuation of the moderation trend from the 10.6% peak in December 2022, though the pace of slowdown has slightly decreased in recent months.
Brad Olsen (pictured above), Infometrics CEO and principal economist, commented on the trend.
“Having eased from an annual peak of 10.6% in December 2022 to 4.5% in December 2023, the annual rise has slowed only slightly in recent months, from 3.2%pa in March to 2.9%pa in May,” Olsen said. “This trend reinforces our recent views that cost pressures are currently on track to level out at a slightly higher rate than before 2022.”
Detailed insights on cost changes
The GSCI, which analyses more than 60,000 products from Foodstuffs North Island and Foodstuffs South Island co-operatives, reveals significant monthly fluctuations.
“Just under 2,900 items increased in cost in May 2024 from the previous month, up around 50% from the number of items that rose in cost in the same month of 2021,” Olsen said.
Despite the general increase, there were also notable declines in prices for some items.
Different grocery departments experienced varied changes in costs. Produce costs rose by only 1% over the year, with decreases noted in items like spring onions and some fruits.
General grocery saw a 3.4% increase, the slowest annual rate since March 2022.
Meanwhile, chilled and frozen goods and butchery costs have seen continued moderation in increases.
On-farm costs stabilise
Recent data from Stats NZ indicated that on-farm costs have remained stable over the past six months, with a minimal annual increase of 1.2%.
“The farm expenses price index showed an unchanged outcome in the March 2024 quarter compared to both the September and December 2023 quarters,” Olsen said. “This levelling out has seen the annual on-farm cost gain slow to just 1.2%pa, the smallest rise since the start of 2021.”
Outlook on grocery costs
While there is a clear trend towards stabilisation in supplier costs, persistent cost pressures in the domestic economy continue to influence price adjustments.
“The stabilisation in on-farm costs and lower fuel prices in recent months are encouraging, and these factors will support the current moderation in cost increases,” Olsen said. “But stubborn cost pressures in the domestic economy are still resulting in more increases in product costs than a few years ago.”
Read the Infometrics report here. To compare with the previous report, click here.
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