McGrath: 'Justification' for supermarkets to cut prices

Finance Minister Michael McGrath said: 'We do acknowledge that energy prices are a significant input cost for businesses and while they’ve reduced quite substantially at a wholesale level, the pass through so far has been limited. But I do think we will begin to see it.' Darragh McSweeney/Provision

There is "justification" for supermarkets to further reduce food prices, but some businesses will still face rising costs, Finance Minister Michael McGrath has said. 

The finance minister also said that wholesale energy costs have fallen, but the passing on of those benefits have been limited. He was responding to questions after the latest official figures showed that wholesale price pressures in April were still evident across a wide range of products, even as electricity prices fell sharply in the wholesale markets from the previous month.         

Mr McGrath told the Irish Examiner he was seeing some price reductions across common household products like milk, but that grocery prices in general remain at high levels, as retailers have yet to feel the impact of falling factory gate energy prices. 

We do acknowledge that energy prices are a significant input cost for businesses and while they’ve reduced quite substantially at a wholesale level, the pass through so far has been limited. But I do think we will begin to see it

He said there was “justification for further price reductions” at supermarkets. Irish consumer price inflation was running at 7.2% in April, according to Central Statistics Office (CSO) figures published earlier this month. 

However, he also said that businesses were still battling hidden costs which may be causing a delay in price reductions. 

“Some input costs have gone down but others are probably rising. It’s difficult for the Government to get under the bonnet and see exactly the makeup of all the costs that businesses are incurring,” he said. 

The figures published  showed the level of wholesale prices across the economy fell 1% from March, and was also lower than April last year, helped by a significant fall in wholesale electricity prices.   

However, the uneven picture will likely renew concerns about whether energy suppliers to householders, retailers, and merchants will pass on any month-on-month decreases from their wholesale suppliers to consumers.

For energy costs, the CSO said wholesale electricity prices fell 13.5% from March and were now 42.5% below prices in April last year. 

In food, wholesale prices were down in April for the second successive month, suggesting retail prices for food at supermarkets should be, or will soon start falling, if wholesale prices are passed on. 

The wholesale prices of the seven of the eight food types tracked by the CSO fell in April from March, with the wholesale prices of dairy, fish, and grains falling for the third month in a row. 

Wholesale prices of fruit and vegetables were unchanged for the third successive month, but were almost 18% higher from April last year. Meat prices after falling in March rose in April, according to the figures. 

For building materials, the picture is more complex. The overall wholesale price level rose in the month and materials rose 11.5% from April last year. However, while the wholesale price of ready mixed concrete and cement blocks both rose sharply in April, many other building material prices were unchanged from March.