Brad Olsen warns food prices to get worse before they get better as new figures show supermarket supply costs increase

A leading economist is warning food prices will continue to rise and hit Kiwis hard in the back pocket as new figures reveal supermarket supply costs have shot up in the last month. 

Cost increases from grocery suppliers to supermarkets accelerated again after a more subdued period over the summer due to the usual moratorium on most cost increases. 

The Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index (GSCI) shows a 10.4 percent rise in February, an acceleration from the 10 percent in January. 

Infometrics Principal Economist Brad Olsen told AM Early on Monday Kiwis should be prepared for costs to get worse before they get better.

"At the moment, we're worried we'll continue to see those continued cost pressures and you'll see grocery supply costs and then food prices to consumers themselves go up and up," Olsen told AM Early host Nicky Styris. 

"We're currently at 10.4 percent on the annual measure, we're not seeing any real signs of relief yet and when we look through the various indicators, there is sort of a mixed bag." 

Olsen said fuel prices have stabilised in New Zealand but are still at a high rate, while global food prices haven't started to track down yet.

"Then you look at some of those other input costs, be it packaging, be it repairs and maintenance, feed costs across the agricultural sector, general on-farm costs and harvesting costs, all of those have increased," he said.

Olsen said this points to more pain for Kiwis in their back pocket. 

"It suggests that, again, if you're seeing these cost pressures, at the early stages of the supply chain, they will continue to filter throughout the supply chain given the disruptions that we're seeing, particularly in that sort of produce space," he said. 

It's not just one area that's being hit hard, Olsen said all costs throughout the supermarket are affected. 

"We've seen the likes of frozen foods, they've also increased in cost quite considerably. General grocery goods, so your tinned goods and similar have also gone up. Butchery and meat costs have risen as well at a slightly lower price, but even when we look globally, we're seeing that global food prices have not started to ease materially yet, in fact, they went up in the last month," Olsen explained.  

"It really does highlight that we're continuing to see those sort of cost pressures across the supply chains internationally and here domestically that are putting further and further challenges in front of suppliers." 

Watch the full interview with brad Olsen in the video above.