The consumer prices for Q3 of 2021 reveal that average prices are largely unchanged from Q2 and up by 3.1% on Q3 2020. A price hike in liquid fuel for household consumption and for vehicles is the key factor in the total price increase.
The Consumer Price Index (CPI) consists of 12 main categories of goods and services. The effect that each category has on the overall price index is weighted according to consumption levels.
One year ago, the CPI was at 121.2. In Q2 2021 it was 124.6 and in Q3 2021 it was 124.9. This means that the CPI has increased by 3.1% over the past year and by 0.3% compared to Q2 2021. Compared to this time last year, prices in 10 out of the 12 main commodity groups have gone up, while prices of food, drinks and education have gone down slightly. The ‘Housing’, ‘Transport’ and ‘Hotels and restaurants’ groups saw the highest price hikes. Higher fuel prices are the key factor for the increased prices in the ‘Housing’ and ‘Transport’ groups, while higher costs of hotel stays are the key factor in the ‘Hotels and restaurants’ group.
For about four years prior to the Covid-19 pandemic, the annual changes in the overall CPI in the Faroe Islands and throughout most of Europe were between 1% and 2%. The onset of the pandemic led to a largely unchanged annual price trend throughout most of 2020. The latest figures show a return to a relatively high price increase in the Faroe Islands and throughout most of Europe. We are now seeing the biggest annual CPI increase since the financial crisis 13 years ago.
Liquid fuel for household heating and for vehicles represents a relatively large portion of the total Faroese household consumption and thus has a relatively large effect on the total CPI. The international drop in oil prices was the key reason to the relative reduction in the annual CPI growth during the pandemic. The relatively large increase in liquid fuel prices over the past 3 quarters is one of the key reasons for the overall CPI increase we are seeing now..
‘Vehicles’ and ‘Fuel for vehicles’ form part of the ‘Transport’ commodity group, and ‘Fuel for household consumption’ form part of the ‘Housing, electricity and heating’ commodity group. The graph shows the relatively large contribution (2%) that these two commodity groups have made on the overall CPI increase of 3.1%.