Supermarket supply costs rise to 10.6% higher than a year ago

Mon, Jan 16

The increase in cost from grocery suppliers to supermarkets has continued to rise, contributing to the high cost of groceries for consumers.

The Infometrics-Foodstuffs Grocery Supplier Cost Index (GSCI), which tracks changes in supply costs, measured the increase in December 2022 at 10.6% more than the previous year.

The monthly increase was the lowest it's been in a year, however, the standard moratorium on cost changes over the summer mean it's unclear whether grocery prices are ready to start easing.

The increasing supply costs of produce, making up the vast majority of individual price changes, have accelerated to 24% over the previous year - with supply challenges, interest rates, weather and inflation all indicated as causes.

The GSCI shows butchery, seafood and frozen foods supply costs are over 10% greater than a year ago - the lowest measured rises were for the supply of liquor and tobacco at under 4%.

Grocery supply costs for supermarkets are crucial because they represent the major component of the eventual price for consumers.

"Every month, the Index tracks what it costs supermarkets to buy the goods to put on the shelf," Infometrics principal economist and incoming chief executive Brad Olsen said.

These supply costs are crucial because they represent the major component of the eventual price for consumers.

In November 2022, the food price index (FPI) released by Stats NZ measured an annual rise of 10.7% - with produce prices increasing 20%, and meat, poultry and fish prices rising 12%.

Supplier cost pressure will be maintained well into this year by high interest rates, inflation and labour market pressure.

Wages in filled jobs rose 7.6% over the 12 months to November, and the "higher wage costs being passed on by suppliers risks fuelling inflationary pressures in 2023", Infometrics said.

Although international food prices rose 26% in the last year, Infometrics said "there is better news on the international front, with shipping costs easing back substantially, global food prices starting to ease, and fuel prices also being tempered".


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