Retailers see further 5% price increases in next three months

Business / news

Latest survey of retailers shows a still significant number are unsure if their businesses will survive the next year

10th Oct 22, 10:34am by David Hargreaves

Source: 123rf.com. Copyright: artisticco

Retailers are expecting to increase their prices on average by another 5% over the next three months, according to the latest retail industry body survey.

In its latest Retail Radar report Retail NZ has drilled down specifically for the first time into the causes of price increases - and perhaps not surprisingly, increases by suppliers is the main reason.

"The influences on prices increases are clear with 92% of retailers informing us that that increases by suppliers is the biggest influencing factor," Retail NZ Chief Greg Harford said.

"This is closely followed by freight costs at 51%, wage increases at 46% and rent increases at 15%. In many circumstances a combination of these influences drove price increases."

Harford said these domestic influences meant that retailers had increased prices on average by 6% in the September 2022 quarter three.

Some 71% of retailers are expecting to increase prices on average by 5% in the next three months – signalling that the "current inflationary rates" in goods and services will continue into 2023.

About 30% of retailers are not sure or not confident if their business will survive the next 12 months. This is an improvement, but "only a slight improvement" on the previous quarter, Harford said.

He said half of all retailers continue to fall short of their quarterly sales targets.

"Retailers are, however, more optimistic as we enter the Christmas and summer periods – 63% of retailers are expecting to meet or exceed their quarterly targets. This is an 8% increase when compared to the same quarter last year."

Pressure on supply chains and freight cost increases continues to be felt, Harford said.

"Although overseas evidence suggests shipping rates are beginning to fall as global trade volumes recover, New Zealand retailers are yet to see this translate into substantial price decreases for freight."

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24 Comments

by nguturoa | 10th Oct 22, 11:02am 1665352937

Great job for these retailers and their suppliers. I did be happy if i get a 5% raise in my salary every 6 months too.

by Independent_Observer | 10th Oct 22, 11:06am 1665353166

This sarcasm or lack of understanding how inflation becomes embedded in an economy?

by GV 27 | 10th Oct 22, 11:08am 1665353318

Well calling it a 'drop in purchasing power' doesn't seem to be something that economists or commentators do anymore, so the assumption seems to be that workers should just lose ground to living costs and then all our problems are then magically solved.

by Independent_Observer | 10th Oct 22, 11:16am 1665353785

I think you misunderstand the point of my post (and I don't disagree with what you say above).

Retailers putting up prices is done for survival - no point being envious of retailers raising prices, if that is what the original post was meant to convey.

If you follow the cycle through, in order for households to survive, they will now need to;

1. ask for a pay rise of equal or greater size to compensate for this increased cost of living or,

2. reduce consumption - which will result in someone else losing their job in the economy (or taking a pay cut).

We should be worried, not envious, that retailers are putting prices up 8% y.oy. It's a dangerous sign for the entire economy.

by Carlos67 | 10th Oct 22, 11:22am 1665354178

There has been dangerous signs for years now, most people carry on oblivious. 2023 is shaping up to be the hangover from hell after a 10 year bender.

by Independent_Observer | 10th Oct 22, 11:46am 1665355582

You're sounding like a DGM these days Carlos. Strange as I thought you used to ridicule them for being too negative.

It's an odd world we live in.

by Carlos67 | 10th Oct 22, 12:58pm 1665359896

Not a DGM, I'm a realist. Ultimately we cannot keep sucking the world dry with our current lifestyles, its all going to end badly its just a question of when. No the worlds probably not going to end next year, always said 2050 but that deadline is coming this way in time not going out. For a few countries around the world its pretty much over already.

by GV 27 | 10th Oct 22, 11:23am 1665354220

Oh for sure. The dominant narrative is that business are forced to put up prices, but the idea that wages should go up to cover increased living cost risks kicking off some sort of spiral. The only way for these two views to exist is to for workers to take a hit in their standard of living.

But 100% agree. It's of huge concern. I've been pushing the 'stagflation is our likely outcome' barrow here for some time, and it looks more like it's a dead-cert. What's worrying me now is the refusal to accept that things might go beyond that, which isn't likely at the moment, but is more likely than it was. Deflation is probably overdue on housing, but unemployment is all that's holding us back from it becoming something we should seriously worry about.

by Independent_Observer | 10th Oct 22, 11:38am 1665355084

Low unemployment just means that central banks can continue ramping up interest rates.

You appear to view businesses and wage earners as different entities in your understanding of how the economy works. Why is this?

To me, a business is a like a wage earner trying to compete in the economy (just at different scales of size/complexity). In the case of a sole trader, it is more or less one and the same. If their costs go up, either as a business or as a wage or (or as a sole trader being one and the same), they either increase their pricing for the goods/services they produce, or they chew into their retained earnings for a period. Or as you say, if they continue it for a long period, they reduce their standard of living. The business will also have to reduce its standard of existence if it doesn't raise prices, or collapse as it defaults on its own out-goings/liabilties/obligations.

Not sure I understand the silo'd thinking between the concepts of business and wage earners. But happy to be enlightened with your view.

by GV 27 | 10th Oct 22, 11:41am 1665355290

It's simple; one has a lot more power to pass on cost increases that the other. Separating them out on this basis makes sense when you live in a high-cost, low-wage economy. I accept it's rudimentary but businesses in NZ don't exactly have a reputation for overpaying people relative to what it costs to survive in NZ. Otherwise we wouldn't be in the mess we're in.

by Independent_Observer | 10th Oct 22, 11:51am 1665355881

Why does it cost so much to survive in NZ?

by Pa1nter | 10th Oct 22, 11:51am 1665355919

I would have thought it'd be obviously apparent by looking at a map.

by Independent_Observer | 10th Oct 22, 12:06pm 1665356796

Globalisation has been deflationary - it has pushed the CPI down not up. Sourcing goods from far away has made many things cheaper.

How bizarre.

Perhaps there is more to this than meets the eye and a simple thought by looking at a map.

by Pa1nter | 10th Oct 22, 12:14pm 1665357242

Being a small country far removed from larger population bases is typically going to diminish all manner of efficiencies and opportunities.

This has been an issue for decades, and it's super rare for me to rock up anywhere in similar circumstances and be surprised at how cheap living costs are on little isolated islands.

Sounds like you already had an answer though when you asked your question.

by J.C. | 10th Oct 22, 1:56pm 1665363401

Globalisation has been deflationary - it has pushed the CPI down not up. Sourcing goods from far away has made many things cheaper.

People have to move from the idea that inflation is simply the CPI. It's the CPI + monetary inflation + asset price inflation.

by rastus1 | 10th Oct 22, 12:53pm 1665359614

After the number of different visits by a multitude of different contractors and vehicles over months just to fix the gutter outside my house - no wonder the cost of living is high. In Vietnam a man on a bicycle with a bucket and trowel would have done it in a morning.

Still asking why?

by Carlos67 | 10th Oct 22, 1:01pm 1665360068

Always been a DIY kind of person myself. I can see that as I get older I will have to farm more and more jobs out but I can make changes to make it easier on myself.

by J.C. | 10th Oct 22, 2:00pm 1665363623

Wage inflation i happening in Vietnam too. Good ex is the manufacturer for Nike in 2020. Had to close the factory in Q2. All workers were kept on salary despite not working. Production was able to commence at start of Q4 but many workers didn't return. They found opportunities elsewhere. The shoe manuf sector is entry-level for factory workers.

by Pa1nter | 10th Oct 22, 2:25pm 1665365155

It's cheaper to get things done it Vietnam.

But it's also a lot worse being your average Vietnamese vs your average kiwi.

by J.C. | 10th Oct 22, 1:54pm 1665363299

Well said. They also don't account for the wealth effect, which I suspect is being seriously impacted right now.

by WellingtonInvestor | 10th Oct 22, 2:41pm 1665366084

It shouldn't have occurred, because interest rates should have been put up o counteract inflation. The reserve banks role is to keep inflation within a band, using interest rates. They dropped them to historic low levels which wa very dangerous for inflation. They made a bad call by thinking it was only temporary, and didn't raise rates soon enough or quick enough IMO.

by Retail shop | 10th Oct 22, 2:06pm 1665364014

No raise in salary in our business. Wholesaler raises prices we mark up our retail prices. Profit remains the same.

by WestieAJ | 10th Oct 22, 2:37pm 1665365869

A lack of competition in NZ is making the higher prices more sticky. Shipping is a case in point. Currently Shanghai to NZ for a 40' container is USD 3500 more than what is being paid Shanghai to East Coast of Australia. Shanghai to US West Coast the rate is now around USD 2000 for a 40' container.

by WellingtonInvestor | 10th Oct 22, 2:44pm 1665366257

Things like building supplies in other countries like the US have dropped back. But in NZ, due to the lack of competition, I can see them using a rachet for prices. The fact is that now is a good way for companies to justify raising prices so some are profiting from it.