Supermarket prices have lifted off again, according to new data, placing pressure on households and feeding inflation while also denting hopes that shoppers were set to soon receive a respite from surging food costs.
Investment bank UBS has found that food and grocery prices at Australia’s dominant supermarket chains, Coles and Woolworths, were running at an annualised 9.6% increase in April, according to its analysis of more than 60,000 items.
The UBS figure, which is disputed by Coles, represents a new high, with fresh food propelling the increases with near double-digit annual rises.
UBS analyst Shaun Cousins said the result rubbed against expectations that prices had already peaked.
“The increasing rate of food inflation is a surprise, and inconsistent with the declines reported by Coles and Woolworths in the third quarter,” said Cousins, referring to the three-month period to March.
The UBS data has been released amid a growing debate over the role of supermarket prices on inflation and whether supermarket chains had profiteered from the pandemic and cost-of-living crisis.
Guardian Australia analysis shows that the major supermarket chains have continued to raise prices on shoppers despite their own inflationary costs being met.
Even as central banks hike rates at record speed to cool spending, inflation is proving stubborn, with the cost of food one of the main contributors.
Food prices were rising at an annual 8% rate in the March quarter, representing only a modest drop from flood-disrupted prices last year.
UBS said some of the higher-than-expected food costs could be tied to sustained pressure on suppliers as well as labour costs.
Woolworths declined to comment on the UBS report.
Coles said the analysis did not capture its full product range or changes in buying volumes.
“UBS’s report is not an accurate reflection of how we calculate and report inflation,” a Coles spokesperson said.
“UBS’s sample data does not capture our full range of products and does not capture changes in customer buying behaviours which impact our sales volumes and product mix.”
Wholesale global food prices have been dropping consistently over the past year, according to the UN, although those decreases are not making it on to supermarket shelves.
Some of the stubbornly high food prices have been linked to costs that come after produce leaves a farm, such as energy, processing and transportation expenses.
The Australian supermarket sector is highly concentrated, with Coles and Woolworths controlling two-thirds of the market. Aldi has an 11% share.
The major chains were recording shrinking or flat margins in 2019, before they started to improve their profitability during the pandemic and subsequent cost-of-living crisis.
A Woolworths spokesperson said that higher wholesale prices it is paying to suppliers was the primary driver of inflation.
A Coles spokesperson said a program designed to save costs that includes faster checkouts was helping drive profit margin improvements.
