The pace of supplier cost increases has continued to slow.
The Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index (GSCI) showed an average 2.3 percent increase in suppliers' charges to Foodstuffs supermarkets for goods in August 2024 compared to a year earlier.
“The annual increase in the Index continued to decline but has been much slower in recent months as the Index appears to be approaching what may be a “new normal,” said Infometrics Chief Executive and Principal Economist Brad Olsen.
“The fall in the average number of items increasing in cost is also encouraging, with the larger number of cost increases in recent years moderating from nearly 5,600 per month to under 3,000 per month.”
The Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index (GSCI), commissioned by Foodstuffs New Zealand, measures the change in the list cost of grocery goods charged by suppliers to the Foodstuffs North Island and Foodstuffs South Island co-operatives.
It utilised detailed Foodstuffs NZ data across over 60,000 products the Foodstuffs co-ops buy to stock in their 500+ stores, making it the largest dataset in New Zealand to give a real-time view of supplier cost changes.
Every month, the Index tracks what it costs supermarkets to buy the goods to put on the shelf. Previous analyses have shown that supplier costs have been a significant component of supermarket prices, representing two-thirds of the on-shelf price.
“Just over 2,400 items increased in cost in August 2024 from the previous month, below the number of items that rose in August 2021, when the number of items increasing in cost first jumped as inflationary pressures rose.”
Average monthly cost increases have moderated to around 2,900 per month, having fallen below 3,000 in the last two months, providing further evidence of more contained cost pressures.
However, costs in August 2024 remained higher for all departments than August 2023. Produce costs were 1.3 percent pa higher, with a slight reacceleration from last month, as apples, cauliflower, and out-of-season fruits rose in cost—offsetting declines in spring onion and potato costs.
Average grocery item cost increases have moderated to 2.7 percent pa, the lowest since the start of 2022. Cooking oils, chocolate, and noodles all experienced higher costs, but pet food, some baking items, and paper towels show a decline in cost.
Lower diesel prices were positive for producers, suppliers, and contributing businesses, given the importance of transport costs for the cost of some goods. However, still-high wage growth and elevated electricity prices highlight continued risks of cost pressures reaccelerating.
In its first Annual Grocery Report, the Commerce Commission took issue with “some of the limitations of the methodology” used to create the GSCI. It said it was unlikely the GSCI alone “can provide a comprehensive picture of grocery supply cost changes.”
Olsen added that the report's criticism was surprising, and some of the subsequent media reporting on it was incorrect.
“The Grocery Commissioner had not raised any concerns or asked any questions about the GSCI with Infometrics ahead of the Annual Grocery Report’s release, despite communications from Commerce Commission staff with Infometrics asking for graph data for the GSCI. We’re attempting to meet with the Grocery Commissioner and his staff to understand the Commissioner’s comments in the Report.”
He said that the Grocery Supplier Cost Index was designed to provide a view of supplier costs and some drivers of these costs across the supply chain.
“We have independently constructed the Index and believe it provides an important view of the underlying trend in supplier costs, constructed from detailed data. We are always considering if methodologies can be upgraded, and we are currently examining the Grocery Commissioner’s Annual Grocery Report and comments to determine what, if any, changes could be made to the Index to enhance its operation.”
More news here
