Source: Radio New Zealand
New Infometric’s data shows supplier costs rose 2.3 percent in February compared with a year ago. 123rf
Shoppers are being told to brace themselves for higher prices at the checkout as the conflict in the Middle East drives up the cost of freight and fuel.
New Infometric’s data shows supplier costs rose 2.3 percent in February compared with a year ago.
Chief executive and principal economist Brad Olsen told Morning Report the increase was an average, with some household staples – such as bread and chocolate – rising more sharply than other commodities.
He said the data didn’t yet reflect the impact of the war in Iran – but expected the effect of it to flow through to food prices within the next three months.
Olsen said the transport industry was responding to rising fuel prices and operators were adjusting their rates accordingly.
He said that would have an impact on supermarkets.
“In terms of the broader supermarket sector in New Zealand, 10 percent of non-wage input costs come directly from transport, so it’s a fairly big line item that starts to hit there.”
Olsen expected other producers to weigh up whether or not to increase prices now – juggling preserving margins and maintaining sales numbers.
“I think there will be a little bit of caution in some areas around pushing prices on,” Olsen said.
“For the likes of transport costs specifically, we’ve had a look and margins do look a lot thinner now over the last couple of years, so we do expect a more immediate pass-through.”
He said businesses were likely to respond differently to the uncertainty around how long the war would last.
“Businesses are also thinking… ‘Do I wait it out? Might things stabilise and calm down within the next week or so?’ … Reality suggests that that’s probably further away.
“They are probably wondering how much do they… take on themselves in the short term and then potentially have to raise prices, or again do they try and push things through because they’re under a lot of pressure.”
Olsen expected supplier costs to increase further and would hit some items harder than others.
“It’s more likely that it will come through on specific items that do take more to transport or do take more fuel into account in their production process.
“It will be uneven, but we’re certainly not expecting to see double-digit increase, but the pressure would be on.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
