Grocery costs for supermarkets are accelerating, which is flowing through to higher prices for consumers, according to the latest monthly gauge.
The Grocery Supplier Cost Index, which measures the cost of more than 60,000 grocery products supplied to the Foodstuffs co-operative, including New World and Pak ’n Save supermarkets, showed the cost of groceries from suppliers rose at an annual pace of 8.7% in August.
That is up from a 7.9% increase in July, and a 7.1% increase in June, and compares with an annual increase of 1.9% in August 2019 prior to the Covid-19 pandemic.
Supermarkets have been under the gun as consumers balk at the higher cost of staples like butter, meat and fresh produce as wages fail to keep pace with rising prices. Annual inflation is running at a 32-year high of 7.3%.
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The index shows the country’s largest grocer has been facing its own cost pressures as suppliers raise prices across the board.
“Cost increases from suppliers remain broad-based across product categories,” said Brad Olsen, principal economist at independent consultancy Infometrics, which was commissioned by Foodstuffs to produce the index.
“Almost three times the number of products increased in cost than for the same month in 2019, with larger increases being seen across a wider group of these products,” he said.
In the latest data for August, 9.4% of products increased in cost by more than 20%, compared with 6% of products in 2019.
“Sustained higher input costs are driving suppliers to pass on these higher costs,” Olsen said. “The continued rise in both the number and scale of cost increases from suppliers to supermarkets underscores the continued mounting pressure on retail grocery prices.”
Foodstuffs has said supplier costs are the major component of product prices in supermarkets, making up about two-thirds of the shelf price.
All departments recorded annual increases in costs compared with August last year, with fresh produce recording the biggest gain of 17%.
Olsen pointed to recent Stats NZ data showing input cost pressures in the economy, which were feeding through to costs charged by suppliers to supermarkets and showing up on supermarket shelves.
The Farm Expenses Price Index increased at an annual pace of 13.4% in the second quarter, the fastest rate since it began in 1993, reflecting increases for fuel, fertiliser and debt servicing costs. Import prices for food and beverages increased almost 19%, the fastest rate since 1985.
“Rising cost pressures both domestically and internationally are putting pressure on suppliers across the board,” he said.
“The momentum in supplier cost pressures within New Zealand suggests that supermarket costs and broader inflation measures will remain elevated for now.”
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