Transport costs spiking as economy slows – NRC

In News3 MinutesBy NZ Trucking magazineNovember 24, 2023

Transport costs have spiked 17% in the September 2023 quarter, according to the National Road Carriers Association’s cost index tool.

The increase in cost comes as diesel prices increased 11% from the previous quarter and the Government reinstated full rates for road user charges.

The figures from NRC’s cost index tool, collated by economics consultancy Infometrics, show road freight costs are going up dramatically at a time when the economy is slowing.

“There is a real squeeze on margins – we are going to see some trucking businesses under stress,” said NRC general manager, policy and advocacy, James Smith.

“The purpose of quarterly cost index tool updates is to give NRC trucking operator members timely information so they can plan and better manage through economic changes.”

Smith said NRC members can enter their cost inputs into the cost Index tool to see the impact of economic changes on their business.

Infometrics chief forecaster Gareth Kiernan, added, “Upward pressure persisted across most other cost categories, although there are signs the rate of increase has either peaked or is close to doing so.

“Prices for tyres fell for the second consecutive quarter, helped by lower international commodity prices and the normalisation of supply chains after the disruption since the start of the pandemic,” he said.

“Diesel prices have eased slightly from their peak recorded in early October. However, based on data for the quarter to date, diesel prices will be an average of about 8% higher in the December quarter than they were in the September quarter.”

Kiernan said the most recent labour market data showed a lift in the unemployment rate to 3.9%, while other survey data shows that current very strong immigration is helping to ease the most critical skills shortages.

“A continued rise in unemployment towards 5% during 2024 should start to translate into slower growth in labour costs and repairs and maintenance costs in coming quarters,” he said.

Kiernan said international financial markets remain anxious about the potential for inflation around the globe to persist for longer than previously expected.

“Consumer price inflation data for New Zealand in the September quarter reiterated concerns about lingering domestic price pressures,” he said.

“Longer-term wholesale interest rates continue to rise and are feeding through into ongoing increases in finance costs for businesses.”