The consumer prices for Q1 of 2021 reveal that average prices have risen by 1.3% compared to Q4 2020 and by 1.1% compared to Q1 2020.
The consumer price index 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.
Of these 12 commodity groups, prices in the ‘housing, electricity and heating’, ‘hotels and restaurants’ and ‘education’ have gone down, while prices in groups such as ‘clothing and footwear’ and ‘transport’ have gone up. The Consumer Price Index (CPI) for Q1 2021 is 123,2, which is an increase of 1.3% on the Q4 2020 CPI and a 1.1% increase on Q1 2020.
The quarterly CPI figures are based on prices measured at the midpoint of the quarter, i.e. the Q1 figure shows prices from mid-February.
It is now more than one year since the Covid-19 pandemic started, which means we now have four quarterly CPI reports available that cover the pandemic period.
For about three years prior to the pandemic, the annual changes in the total CPI in the Faroe Islands and throughout most of Europe were between 1% and 2%. The pandemic has seen a relatively large reduction in the annual change in the total CPI, but this figure has now surpassed 1% again.
The main reason for the relative reduction in the annual CPI growth during the pandemic has been the international drop in oil prices. The CPI over the past year clearly shows the effect that the lower oil prices have had on the price of liquid fuel for household consumption. Representing a significant portion of the total spending of an average Faroese household, liquid fuel has a relatively large effect on the total consumer price index.
The graph below shows the effect of price changes in each of the 12 commodity groups on the total CPI when taking into account the relative importance of the goods and services as measured in relation to the total consumption of households. The graph shows that the prices of goods and services in the ‘housing, electricity and heating’ and ‘hotels and restaurants’ groups are lower than a year ago, while prices in all other groups are, on average, higher, contributing to an overall increase in the CPI. One notable price increase between Q4 2020 and Q1 2021 is seen in vehicles, which form part of the ‘transport’ commodity group.