Food prices have risen at their fastest pace in 13 years, with an 8.3% annual increase recorded in August, Statistics NZ said on Tuesday.
Stats NZ’s Food Price Index data showed grocery food prices increased by 8.7% in August 2022 compared with the same month in 2021.
Monthly food prices were 1.1% higher in August 2022 compared with July 2022, with the price of fruit and vegetables bumping up the monthly numbers, with a 4.1% increase.
Stats NZ said the next largest contributor to the rising monthly price movement was grocery food, which rose 1.0%. Prices rose in particular for eggs (up 6.7%), yoghurt (up 4.7%), and chocolate biscuits (up 7.1%).
Higher prices were also seen for restaurant meals and ready-to-eat food, with a 6.5% increase recorded. Meat, poultry, and fish prices increased by 7.6% and non-alcoholic beverage prices rose by 4.1%.
Fruit and vegetable prices saw a 15% annual increase compared with August 2021.
Food prices have been rising since early 2021, but have taken off in 2022. In January this year food prices saw annual rises of 5.9%. Then February brought a 6.8% annual increase.
Heat in the kitchen
These rising food prices are generating political heat, with the Government taking aim at the supermarket duopoly, the corporate Woolworths and the co-operative Foodstuffs, through the Commerce Commission’s supermarket study.
That study found the big two were effectively competition killers, offering consumers a wide range of groceries at locations they can easily access (both in store and online), and at prices generally lower than those offered by competitors.
It also found a lack of suitable sites for store development and wholesale supply weakness would hold back any potential duopoly-slayers.
Commerce Minister David Clark has decided to appoint a grocery commissioner to regulate the industry, including potential fines for breaches of a proposed code of conduct.
Clark is also forcing the dominant players to open up wholesale operations to their rivals, and threatening the grocery commissioner will ensure prices are fair.
Foodstuffs HQ (there are separate structures for the North and South Island operations and an overarching corporate office in Auckland led by Chris Quin) has moved to head off some potential action the Government could take against it by pledging to remove covenants it had held over potential development land.
It has also joined the information war, most recently publishing its own price increase data which found that supermarkets were paying suppliers 8.7% more in August this month than the same month in 2021.
The Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index measures the change in the cost of grocery goods charged by suppliers to Foodstuffs North Island and South Island stores.
Infometrics says the index pulls data from more than 60,000 products from Foodstuffs NZ data.
The supermarket said in a press release that the largest component of shelf prices “is the cost of goods from our suppliers – 68c in every dollar”.
It said it had increased the prices of goods in the Food Price Index by 6.1%, meaning its co-operative members held prices at 2.2% less than inflation.
47 Comments
Like dropping interest rates the last 30+ years when we were importing deflationary forces from globalisation (and as a result, pumping a massive property bubble?)
I don't know. Everyone who visits NZ seems to comment on how expensive everything is. These deflationary forces you speak of are not evident. Even among items like smartphones, you can get better value for money in Asia.
Imagine how expense things might get if CPI doesn't get back to the 1-3% band (if they were already deemed to be expensive!)
But yes I understand your point.
Boomer retiring and geopolitical instability in theory will be inflationary and the reverse of what we've seen the last 40 years or so....but we will find out in time.
Because there is a substantial lag between the cause - the effect and then the reporting.
Sorry I don't buy that. If you are claiming there is a lag after supply chain issue being the reason of current inflation, how can you be so sure the inflation was caused by supply side issues but not RBNZ and other central banks relentless interest rates dropping? Let's go through the timeline again. In 2020, RBNZ dropped its rate by 75bps. Late 2021, the inflation started to kick in. I can easily say the inflation was caused by extremely low interest rates from central banks as there was a substantial lag. Don't get me wrong, I am not saying there is no lag. But clearly it is not the reason that we are still experiencing high inflation at the moment.
Was it ever a supply side issue???? Of course it was, the Government said it was.
“The further you look into the past, the further you can see into the future” — Winston Churchill
Printing money always has caused inflation. The handing out of this "free" money caused to much demand (Supply side problems)
The RBNZ caused inflation.... and now their trying to rein it in
They remind me of the movie about the Chenobyl disaster, when the operators were trying to balance the water flows to the reactors and over-compensating each way with wilder and wilder swings, and we all know how that ended.... (badly...)
They printed $10's of billions to fund labours debt fueled spending spree and now wonder why we are in this predicament...?
The RBNZ caused inflation.... and now their trying to rein it in
You think so? Depends on what kind of inflation you're talking about. The RBNZ caused monetary inflation and asset price inflation. Of course that has 2nd-order effects on the CPI.
BTW, Sam Stubbs came out in defence of Kaumatua Orr and gave him a pass on inflation.
https://www.stuff.co.nz/business/money/300674229/in-defence-of-reserve-…
On the consumer goods front, international freight went through the roof, and the price of everything imported skyrocketed.
This is not to excuse the rbnz, but they have zero control over that.
The supermarkets however, are extortionate, they mark up vegetables 100% plus.
All government spending results in the creation of new currency in the form of central bank reserves. That is why we have taxation as it destroys these reserves again. Issuing bonds is purely an interest rate mechanism and it has nothing to do with financing spending.
Standard and Poor's give a good description here of central banking and QE. https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/…
As much as I like bashing corporate profiteers - the business input costs for horticultural and fruit growing farms show that increased producer costs are the cause of the extra costs at the checkout. When you dig into the data, the drivers of the higher prices are really clear: oil prices (fuel, fertiliser, packaging) and.... much higher interest costs!! Hilarious.
True that, as an employer I can tell you that my staff are trying everything to force us to pay them more. Working to rule, taking all statutory leave, whether they need it or not (e.g. sick leave) expecting us to be flexible, but not willing to be flexible themselves, continual absences for important but unexplained 'medical appointments', etc. We pay salary increases on the basis of increased value to the market, not staff need. Ultimately if staff get too expensive we'll reduce our growth rate and make do with fewer people. I would imagine lots of businesses like ours will make the same rational choices. You can do the math on how the aggregate around the country will affect the economy, including unemplyment, financial stress, and asset prices.
Lets reword that shall we
Working to rule - You mean following the conditions in the agreed IEA. i.e. doing the job you pay them for, not slaving for free on extra stuff you don't want to pay them to do.
taking all statutory leave - taking the bare minimum amount of leave required by law to ensure physical and mental wellbeing. How dare they!!!
Expecting us to be flexible - much irony in that one?
Its not a one off though.
Take your typical business that has been loading up with debt for share buy backs or to run marginal projects where the NPV/IRR model works while the cost of debt/capital was near zero. Now debt servicing costs are rising at a crazy speed and that is an expense that is chewing away at their net profit.
So the only way they can manage this, without reducing debt and changing their capital structure, will be to increase their revenue - and how do they do that? They increase prices of goods and services.
And if the cost of goods and services increase, then people across society need higher wages to pay for the higher cost of goods and services that are essential to them on a daily basis....so they ask for a pay rise....and by getting a pay rise, then their own business need to increase their own revenues by increasing their sales price from goods and services they also provide...
And so on and so forth.
So raising interest rates, could trigger wage price spiral as central banks continue to raise rates.
That is if raising rates doesn't cause a deflationary bust....its possible it will do the reverse and cause inflation to go even higher in the short term that it would have without raising interest rates...
Is this because in low-interest times, said businesses borrowed from future cash-flows to maintain viability/profits instead of raising prices, which also gave the illusion of lower CPI as costs were not passed through? If so, just another mechanism hiding real inflation, influenced by the low interest rates of the day. Just like the FLP.
This is true. But do they need the credit lines, i.e., do they not have enough cash reserves to handle it otherwise (and I grew up on a farm, so I do have some idea how many farmers run credit to cover cashflow between payment/payout).
It's possibly philosophical, but it's akin to the SMEs who use their houses as collateral for business finance - the reality is, if the business doesn't stand without that finance, it's not that far off collapse. And that is what costs people their houses/farms, and their worker's livelihoods.
The future is an expensive place, but we've an entire generation in leadership who have made it cheap to plunder, as they [likely] won't be paying the eventual cost.
Exactly. A business model that relies on ever-increasing cheap debt to maintain low prices is not sustainable.
And if the bulk of businesses operate that way, you have a structural vulnerability. You've just been putting off the inevitable choice between price rises and insolvency. Maybe that's what we're seeing now. It's certainly the case in the tech sector.
That sums up our entire economy - interest rates had to be dropped, or there were going to be widespread insolvencies from 2008 - present.
Central banks have to increase money supply to erode the debt in the system - and if they get it wrong, like they did in 2020-2021, inflation can get out of hand and they have to raise rates higher and faster than anyone would ever imagine in order to regain control. But in the process of doing that, they will wipe out some of the people/businesses they were trying to protect in the first place (all the zombie companies/households who have been insolvent, but relying on the cost of debt to become ever cheaper over time while their income increased 1-3%p.a.).
Meanwhile, in my local Pak n Spend store, many of the better value products are no longer being stocked, with the more expensive equivalents being stocked, but not the better value ones.
The prices technically may not have gone up, but customers no longer have the choice of buying the better value (better value doesn't mean lower quality) products.
Go figure.
Cannot do Pak n Save anymore. I shop very brand specific and they started dropping all the basics l like years ago. Supermarket vegetables are pretty poor by comparison to a proper Vegie shop but its a question of all that extra time that people don't have to do separate shopping. If you can find a great butcher right next to a great vegie shop then its worth it. Decent Broccoli tastes like a different veg when its grown properly.
Pinch of salt anyone? Now we are down to fighting over the vegie prices...Whats happening on the alcohol front ,I suspect the drinkers dollar carries weight... Has grog gone 15% in the last year if we exclude/include the extra tax thats been whacked on it ? Staple vs Luxury ? All of it needs to be trucked to supermarkets. How about perfume...How much has a 100ml bottle of No5 gone up in the last year? Nice to have some comparative data. Are the little Luxury items trending the same way?
Agree, there are higher input prices with growers and producers that flow into the supermarkets.
But recall, Operation Leaf that was run by the Foodstuffs Group was to increase the discount margin to an eye watering 39%.
Result being Foodstuffs share of wallet is now from both the consumer and grower/producer.
Something has to give...
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