Price increases approach a "new normal"
The Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index (GSCI) revealed a 2.3% annual increase in supplier costs to supermarkets in August.
While costs remain elevated, the pace of increases is moderating.
“The annual increase in the Index continues to decline, but has been much slower in recent months as the Index appears to be approaching what may be a ‘new normal,’” said Brad Olsen (pictured above), CEO and principal economist at Infometrics.
Fewer price hikes for grocery items
According to the latest data, just more than 2,400 items saw price hikes in August, a significant reduction from previous years.
Olsen noted that “average monthly cost increases have moderated to around 2,900 per month,” down from nearly 5,600 items in the peak of inflationary pressures.
Produce prices rose by 1.3%, driven by increases in apples, cauliflower, and out-of-season fruits, though declines in spring onion and potato costs helped balance the rise.
Wages and electricity prices still a concern
While the moderation in cost increases is encouraging, Olsen warned that risks remain due to high wage growth and elevated electricity prices.
“Lower diesel prices are a positive for producers and suppliers, but continued high costs in other areas could reignite inflationary pressures,” he said.
Disagreement with Commerce Commission’s concerns
The Commerce Commission’s Annual Grocery Report questioned the methodology behind the GSCI, which Olsen found surprising.
“The grocery commissioner had not raised any concerns or asked any questions about the GSCI with Infometrics ahead of the report’s release,” he said.
Infometrics, which recently reported on the unexpected shift in rental affordability in New Zealand in recent years as well as the continued weakening of the NZ economy, is now reviewing the report to determine whether any methodological changes are needed.
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