What’s the REAL inflation rate?

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Forums › Finance and wealth management › What’s the REAL inflation rate?

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#2718990 6-Jun-2021 17:54

BlinkyBill:

I have Woolworths shares. Woolworths owns Countdown NZ and hence staffing numbers are public information. There are 184 Countdown stores and distribution centres in NZ, and a hair over 18,000 total employee’s in the NZ business (i.e. not just store staff, that’s all staff).

So the average Countdown store/logistics branch is serviced by 98 employees including management and head office. That’s full-time and part-time. This from 2018 annual report.

Countdown has more larger stores on average than Pak-and-save, New World and Four Square, etc; so more employees.

I think it’s fair to say most supermarkets in NZ employ well under 90 total employees, full and part time.

They turned over $7.2 billion. Assume that 10,000 full time equivalent employees, all of whom got an extra $1.10 / hour

~ 0.32% "inflationary effect" from supermarket employee wage increases.

(I still don't believe that the 1.5% CPI figure represents even close to reality, but that's just anecdotal - and some things have actually gone down in price, the OP mentioned mince, Countdown reduced the "standard low price" for Silver Ferns Farms venison mince 400g vacuum packs from $12 to $10 over the past 6 months.)

mattwnz

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#2718994 6-Jun-2021 18:12

Fred99:

BlinkyBill:

I have Woolworths shares. Woolworths owns Countdown NZ and hence staffing numbers are public information. There are 184 Countdown stores and distribution centres in NZ, and a hair over 18,000 total employee’s in the NZ business (i.e. not just store staff, that’s all staff).

So the average Countdown store/logistics branch is serviced by 98 employees including management and head office. That’s full-time and part-time. This from 2018 annual report.

Countdown has more larger stores on average than Pak-and-save, New World and Four Square, etc; so more employees.

I think it’s fair to say most supermarkets in NZ employ well under 90 total employees, full and part time.

They turned over $7.2 billion. Assume that 10,000 full time equivalent employees, all of whom got an extra $1.10 / hour

~ 0.32% "inflationary effect" from supermarket employee wage increases.

(I still don't believe that the 1.5% CPI figure represents even close to reality, but that's just anecdotal - and some things have actually gone down in price, the OP mentioned mince, Countdown reduced the "standard low price" for Silver Ferns Farms venison mince 400g vacuum packs from $12 to $10 over the past 6 months.)

Didn't they remove quite a few things from the inflation figures quite a number of years ago. I see in the mid 70's early, and both early and later 80's, inflation got up to nearly 20 % but not sure if that included things like existing house prices which don't appear to be included in the CPI .

sbiddle

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#2719002 6-Jun-2021 18:42

BlinkyBill:

sbiddle:

From speaking to a friend who still owns a supermarket the increased wage costs for a large format supermarket in NZ due to the new minimum wage increase represents is around $500,000 per year once everybody is moved up (you can't just move minimum wage up, you have to move lots of people up). It's still pretty significant increase and ultimately will be passed onto consumers in what is a very low margin industry.

your friend is bull**itting you.

You are aware of course that it's an industry I spent 30 years of my life working in from the time I could walk?

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#2719003 6-Jun-2021 18:45

BlinkyBill:

I think it’s fair to say most supermarkets in NZ employ well under 90 total employees, full and part time.

90 employees is only a medium sized store. A large store is well over that.

And to provide some evidence since nobody seems to want to believe the figures I post, both NW stores in Wanaka had 280 staff between them, and neither are anywhere near as big as the store I'm talking about.

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#2719004 6-Jun-2021 18:47

blackjack17:

Not too sure (I agree with the wage increase but it has come at a cost)

$1.10 increase = $1.13 after kiwisaver

times 100 (number of staff) equals $111.3

times 40 (hours per week) $4,452

times 52 (weeks in a year) $235,040 in additional costs

Countdown doesn't pay minimum wage but still would have had to increase to maintain the difference. While it isn't $500,000 it is still a considerable amount.

Not everybody is on the minimum wage, and the key thing is that if you move the lowest paid people up you have to move everybody up to keep any sort of pay scale. There are also a lot of part time staff at stores which needs to be factored in as well.

mattwnz

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#2719008 6-Jun-2021 20:39

A video released today about the inflation https://www.youtube.com/watch?v=3r-oh717xGU

This is a good channel for those interested in inflation , money and property. It is Australian but also does videos about NZs housing crisis and how insane things have got over here

blackjack17

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#2720066 7-Jun-2021 07:37

sbiddle:

blackjack17:

Not too sure (I agree with the wage increase but it has come at a cost)

$1.10 increase = $1.13 after kiwisaver

times 100 (number of staff) equals $111.3

times 40 (hours per week) $4,452

times 52 (weeks in a year) $235,040 in additional costs

Countdown doesn't pay minimum wage but still would have had to increase to maintain the difference. While it isn't $500,000 it is still a considerable amount.

Not everybody is on the minimum wage, and the key thing is that if you move the lowest paid people up you have to move everybody up to keep any sort of pay scale. There are also a lot of part time staff at stores which needs to be factored in as well.

Was supporting your figure. Big stores would have well in excess of 100 staff, plus all the staff not on minimum wage would need to get boosted as well.

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KiwiSurfer

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#2720168 7-Jun-2021 14:23

There is no way to get a real inflation rate. Everyone buys all sort of different things so everyone will have a different perception of what the inflation is. Stats NZ calculates it from a basket of typical goods a typical household would buy which is a reasonable compromise. While it may seem inflation is as high as 10-20%, I suspect that sort of inflation is only occurring in relation to certain goods. We as humans we are quick to notice things out of the ordinary but not so good at observing that many things are the same (or not much different). Most likely the official rate will look reasonable once you take into account the range of the goods a typical household buys and weight the prices by the amount of each good a typical household typically buys.

elpenguino

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#2720293 7-Jun-2021 16:43

sbiddle:

Fred99:

The impact of wage increase on FMCG is tiny - on restaurant food/takeaways, then sure, it's high as labour cost is a very high % of retail prices.

From speaking to a friend who still owns a supermarket the increased wage costs for a large format supermarket in NZ due to the new minimum wage increase represents is around $500,000 per year once everybody is moved up (you can't just move minimum wage up, you have to move lots of people up). It's still pretty significant increase and ultimately will be passed onto consumers in what is a very low margin industry.

You've said that before but evidence is that NZ supermarkets is a $16 billion/year business. I think they can afford it.

Countdown's gross margin is 24 %

https://www.stuff.co.nz/business/money/108114861/is-new-zealands-supermarket-duopoly-ripping-us-off

Most of the posters in this thread are just like chimpanzees on MDMA, full of feelings of bonhomie, joy, and optimism. Fred99 8/4/21

elpenguino

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#2720294 7-Jun-2021 16:43

sbiddle:

Fred99:

The impact of wage increase on FMCG is tiny - on restaurant food/takeaways, then sure, it's high as labour cost is a very high % of retail prices.

From speaking to a friend who still owns a supermarket the increased wage costs for a large format supermarket in NZ due to the new minimum wage increase represents is around $500,000 per year once everybody is moved up (you can't just move minimum wage up, you have to move lots of people up). It's still pretty significant increase and ultimately will be passed onto consumers in what is a very low margin industry.

You've said that before but evidence is that NZ supermarkets is a $16 billion/year business. I think they can afford it.

Countdown's gross margin is 24 %

https://www.stuff.co.nz/business/money/108114861/is-new-zealands-supermarket-duopoly-ripping-us-off

Most of the posters in this thread are just like chimpanzees on MDMA, full of feelings of bonhomie, joy, and optimism. Fred99 8/4/21

eracode

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#2720358 7-Jun-2021 20:34

KiwiSurfer:

There is no way to get a real inflation rate. Everyone buys all sort of different things so everyone will have a different perception of what the inflation is.

As far back as ten or more years ago I used to think I was doing well if I could get three 1-litre bottles of standard spirits (gin, vodka and whiskey) for under $100. If I watch for specials, I can still do that today.

So, by my index, the inflation rate is zero.

Sometimes I just sit and think. Other times I just sit.

mattwnz

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#2720360 7-Jun-2021 20:38

eracode:

KiwiSurfer:

There is no way to get a real inflation rate. Everyone buys all sort of different things so everyone will have a different perception of what the inflation is.

As far back as ten or more years ago I used to think I was doing well if I could get three 1-litre bottles of standard spirits (gin, vodka and whiskey) for under $100. If I watch for specials, I can still do that today.

So, by my index, the inflation rate is zero.

That is part of the issue, in that specials on goods in NZ are often just price rotations. NZers have got used to buying like this, so are used to only buying from some stores when there is a sale on...which can be very regular.

eracode

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#2720363 7-Jun-2021 20:42

mattwnz:

That is part of the issue, in that specials on goods in NZ are often just price rotations. NZers have got used to buying like this, so are used to only buying from some stores when there is a sale on...which can be very regular.

You’re right - but what does this mean for the OP’s question? That there’s no correct or single answer - as @Kiwisurfer says?

This also means I have no retailer loyalty. It doesn’t worry me whether I buy these products from one place or another, one street away - just go where the price is right.

Sometimes I just sit and think. Other times I just sit.

mattwnz

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#2720440 8-Jun-2021 00:24

eracode:

mattwnz:

That is part of the issue, in that specials on goods in NZ are often just price rotations. NZers have got used to buying like this, so are used to only buying from some stores when there is a sale on...which can be very regular.

You’re right - but what does this mean for the OP’s question? That there’s no correct or single answer - as @Kiwisurfer says?

This also means I have no retailer loyalty. It doesn’t worry me whether I buy these products from one place or another, one street away - just go where the price is right.

It makes it a lot more difficult to measure inflation, that is for sure. In the US it is now over 4%. Not sure how they measure there inflation compared to how NZ does it. But if it was over 4% in NZ, then interest rates would have to rise. But apparently the US are saying it is only temporary. But how long is temporary. Is there actually a definition for this.

Fred99

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#2720516 8-Jun-2021 08:18

Global food price inflation is spiking:

The FAO Food Price Index (FFPI) averaged 127.1 points in May 2021, 5.8 points (4.8 percent) higher than in April and as much as 36.1 points (39.7 percent) above the same period last year. The May increase represented the biggest month-on-month gain since October 2010. It also marked the twelfth consecutive monthly rise in the value of the FFPI to its highest value since September 2011, bringing the Index only 7.6 percent below its peak value of 137.6 points registered in February 2011. The sharp increase in May reflected a surge in prices for oils, sugar and cereals along with firmer meat and dairy prices.

http://www.fao.org/worldfoodsituation/foodpricesindex/en/

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