Consumer price index
07. Jul 2023
Inflation falls to 4.4%
The Consumer Price Index (CPI) measures inflation as experienced by Faroese households in their daily living expenses. The latest CPI figures are from May 2023.
Prices of food and non-alcoholic drinks along with rising interest rates are the main reasons for the general increase in consumer prices in the past year. Lower fuel prices also play a key role in the latest annual inflation figure.
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Higher prices across all main categories
The Consumer Price Index (CPI) consists of 12 main categories of goods and services. Although the annual inflation rate has come down, higher prices have been registered in all main categories except ‘transport’. The annual inflation rate is now at the same level as in February 2022.
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Grocery prices up by more than 11%
‘Food and non-alcoholic drinks’ make up the largest portion of the average Faroese household spending. This category saw a price increase of just over 11% in the past year.
Prices in this category continue to rise, though at a slower pace than in the past 18 months. Since the last quarterly CPI report from February 2023, grocery prices have risen 1.4%. Prices in this category have seen quarterly increases of 2% - 4% since February 2022.
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Within the ‘food and non-alcoholic drinks’ category, prices of vegetables have seen the highest price hikes, going up by more than 6% since February 2023. From November 2022 to February 2023, the price of fruit rose the most. Vegetables are now almost 18% more expensive than a year ago, while fruit prices have risen by 15%.
Prices of cooking oil, butter and margarine have also risen considerably in the past year, but they have now stabilised at the same level as in February 2023.
The price of bread and cereals continues to rise, with rice and flour prices rising the most since February 2023. Prices in the bread and cereals category have increased by more than 12% in the past year.
Fish products have become relatively cheaper for households in the past year compared to the other ‘food and non-alcoholic drinks’ subcategories, with an annual price increase of just over 6%.
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Prices have gone up across all grocery categories in the past year. Prices of sugar and candy have gone up by 7%. Non-alcoholic drinks have also become more expensive, with coffee, tea and cocoa prices increasing by more than 21% since May 2022.
Interest rates affect the CPI
Mortgage rates have increased significantly in the past year. Although interest rates continue to rise, overall housing expenses dropped by 1% since February 2023.
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An almost 13% drop since February 2023 in the price of liquid fuels, used for household heating, has helped keep the otherwise high inflation rate in check. Households spent just over 4% more on ‘housing’ expenses, on average, in May 2023 than a year ago.
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Slower price growth than in other countries
The Faroese annual inflation rate in May 2023 was somewhat lower than in the other Nordic nations and EU nations, with the exception of Denmark, which had a 2.9% inflation rate. Norway had a rate of 6.7% in May 2023 after enjoying lower inflation than the Faroes in every CPI report since February 2022. Finland’s inflation rate in May 2023 was 6.8%.
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Sweden and Iceland had rates approaching 10%. The EU average rate was just above 7%. Note that the EU inflation rate is based on the HICP index (the Harmonised Indices of Consumer Prices), which means that rental prices are not included.