Consumer price index
24. Mar 2025
Annual inflation at 1.3%
The Consumer Price Index (CPI) measures inflation as experienced by Faroese households in their daily living expenses. The latest CPI figures are from February 2025.
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Consumer prices increased by 1.3% from February 2024 to February 2025. Price growth is now slower than we have seen in the past four years. However, the annual price increase for February 2025 is slightly higher than in the previous CIP report from November 2024 when it was 0.8%.
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Varying price trends
Of the 12 main categories in the CPI, ‘Food and non-alcoholic drinks’ makes up the largest portion of the average Faroese household spending. This category is also the key contributor to the price growth in this quarterly CPI report.
Other goods and services are offsetting the overall price growth. Prices in ‘Clothing and footwear’ fell 2.7% year-on-year, while ‘Housing’ prices fell 0.9%. ‘Health’, ‘Transport’ and ‘Education’ also saw slight year-on-year price decreases.
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Prices of furniture, household equipment and tobacco have increased slightly, as have daycare fees.
Higher prices for coffee, butter and meat
Grocery prices continue to climb, rising almost 5% since February 2024.
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Within the ‘food and non-alcoholic drinks’ category, meat prices have risen the most, up more than 9%, with lamb and pork prices leading the way. Poultry prices, on the other hand, have declined. Butter prices increased by more than 10%, while milk, cheese and egg prices rose by 3.3%.
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Sweet foods and beverages have also become more expensive in the past year, with chocolate and confectionary prices rising by more than 4%. Coffee prices are up 11% year-on-year.
Lower housing expenses
Housing expenses for Faroese households saw an average decrease of 0.9% in the past year.
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The average interest rate fell by more than 8% over the past year, pulling down overall price growth. The price of district heating and fuel oil is down slightly compared to February 2024. On the other hand, rent prices have increased by 8%.
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Electricity prices remained stable over the past year. Electricity prices are seeing significant fluctuations in the countries around us. The stable Faroese electricity prices diverge from trends in other countries, contributing to the distinct overall price growth in the Faroes. Over the past five years, electricity prices in Iceland and Denmark rose 44%, compared to 17% in the Faroes. Norway’s electricity prices rose by a full 84% in the past year.
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Liquid fuels for household heating and fuel for transport constitute a significant portion of average household expenses in the Faroes, thereby exerting a notable influence on the inflation rate. The price of fuel for transport fell by almost 10% year-on-year.
Slower price growth than in EU countries
The annual Faroese inflation rate is lower than the EU average of 2.8%. Finland has a lower inflation rate, at 0.5%. Sweden has the same 1.3% rate as the Faroes. Denmark is at 2.0%, while Iceland has the highest Nordic rate of 4.2%. Norway stands at 3.6%.
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Note that the EU inflation rate is based on the HICP index (the Harmonised Indices of Consumer Prices), which means that rental costs are not included.
About the Consumer Price Index and inflation
About the Consumer Price Index and inflation
Inflation is the rate of increase in prices over a given period. The Consumer Price Index (CPI) is the most widely used measure of inflation. It measures the overall change in consumer prices based on a representative basket of household goods and services. If the annual inflation rate is 5%, consumers must pay DKK 105 for the same goods or service that cost DKK 100 the previous year.
When the inflation rate is high, money effectively loses value because you receive fewer goods and services for the same amount spent. In other words, a household’s purchasing power decreases if its income does not keep up with the inflation rate.
Changes in consumer prices vary across the categories of goods and services. The CPI weighting system reflects the relative importance of the goods and services as measured by their shares in the total consumption of households.
Faroese CPI figures are compiled quarterly, in February, May, August and November. This is done in accordance with international standards, thus allowing for comparisons with the CPI figures of other nations.
The CPI is one of many measures of inflation in an economy. Others include the Producer Price Index, which is a measure of the change in prices that domestic producers receive for their goods and services, and the so-called GDP deflator, which is a measure of the price of all new, domestically produced, final goods and services in an economy in a year relative to their real value.