Consumer price index

15. Jan 2021
Average consumer prices increased by 0.3% in 2020

The consumer price index for Q4 2020 was 121.6, which is a 0.4% increase on Q3 2020 and a 0.4% decrease on Q4 2019.

Average annual price changes compiled from the 4 quarterly figures are compared with average prices from previous years. These comparisons are based on the consumer prices averaged over the 4 quarters to smooth out price fluctuations in individual quarters.

While 2017-2019 saw an annual consumer price increase of just above 1%, this year’s figure shrank to 0.3%.

One fifth of household consumption is spent on food and non-alcoholic beverages, and prices in this commodity group saw an average year-on-year increase of 1.7%. Another fifth is spent on housing, electricity and heating, a commodity group where the average price went down by 4.2% in 2020. This is to a large extent due to a 20% average decrease in liquid fuel prices. As indicated in the graph below, oil prices have been heavily affected by the Covid-19 pandemic.

A relatively large proportion of household consumption is also spent on transport. The average price of fuels and lubricants for personal transport equipment saw a year-on-year drop of 16% in 2020, while the price of vehicles went up by 3.2%. The average price for goods and services in the transport commodity group remained virtually unchanged between 2019 and 2020.

Supply in accommodation services increased in line with the sharp drop in demand as tourist numbers plummeted after the outbreak of Covid-19. This resulted in a big drop in the price of hotel stays in the Faroe Islands as well as in neighbouring countries. However, since hotel stays represent a relatively small portion of average household spending, this price drop does not affect the total consumer price index as much as e.g. the liquid fuel price change.