Analysts highlight a trend that may influence the market
The latest report from the Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index (GSCI) reveals that while supplier costs continue to rise, the rate of increase is slowing.
The index, which measures the change in the list cost of grocery goods charged by suppliers to the Foodstuffs North Island and Foodstuffs South Island co-operatives, showed a 3% year-on-year increase in April 2024. This marks a slowdown in annual growth, indicating a possible stabilization of costs, but still at a pace higher than in previous years, according to Brad Olsen (pictured), chief executive and principal economist at Infometrics.
“Trends in supplier costs and input cost indicators in April remained consistent with a continued slowdown in cost pressures in 2024. However, as previously signalled, supplier cost increases look likely to stabilise at a higher-than-previous pace,” said Olsen.
The report underscores that the number of items seeing cost increases month-on-month remains substantially elevated compared to when cost pressures were less intense. In April, nearly 3,000 items rose in cost, nearly double the number that rose in the same month in 2021. Although this is below the more than 5,000 items that increased in cost in 2022 and early 2023, Infometrics noted it's a sign that cost pressures continue to impact the grocery sector.
Increases in supplier costs
The data indicates that certain departments experienced higher-than-average cost increases. Excluding tobacco, bakery costs rose the most, by 4.3%, with frozen foods also seeing significant increases, particularly in frozen meats, mixed vegetables, and frozen meals. Produce costs showed a more modest rise of just 1.1% year-on-year, an increase that is less intense as supply improved following the Auckland floods and Cyclone Gabrielle.
Cost pressures are influenced by several factors, including shipping costs, currency fluctuations, and global commodity prices. Shipping costs have moderated, but remain high compared to previous years, with the Freightos Global Container Freight Index showing prices 78% higher than at the end of 2023. Similarly, the New Zealand dollar (NZD) averaged below US60c in April, contributing to higher import costs.
Additionally, fuel costs have stabilized but remain elevated, with diesel prices averaging $2.29 per liter, about 11% lower than in 2022, but 10% higher than at the same point in 2023. Infometrics noted this is partly due to ongoing conflict in the Middle East, maintaining upward pressure on fuel prices.
The GSCI draws on detailed data from Foodstuffs NZ, encompassing over 60,000 products purchased to stock more than 500 stores in the Foodstuffs co-ops. This extensive dataset, the largest of its kind in New Zealand, provides a real-time perspective on supplier cost fluctuations, the news release noted.
