How long will food prices remain high in Norway?
In the last 12 months, prices in Norway have risen by 6.4 percent. This increase was fuelled – to a considerable extent – by soaring food and drink prices. How long will this trend persist?
On Wednesday, Statistics Norway (SSB) released figures on price growth in the country over the past twelve months.
From April 2022 to April 2023, prices in Norway rose 6.4 percent. The SSB pointed out that food and drink prices contributed significantly to the high price increase, while electricity prices slowed price growth.
The figures show that increased food prices contributed the most to the inflation in the last year: from April 2022 to April 2023, the prices of food and non-alcoholic beverages rose by 10.5 percent.
Between March and April 2023, food and non-alcoholic beverage prices rose by 2.5 percent.
"Only once before has a larger monthly change been measured from March to April, so this may indicate that something more than just the price spike after the Easter offers is fuelling the big price rise," section manager Espen Kristiansen at the SSB said.
How long will food prices continue to increase?
Many industry experts believe that the worst in terms of food price increases is yet to come, as prices have been artificially low in several big chains due to competition in the run-up to Easter.
Norwegian supermarkets had gone through a price war that started in February when they froze prices on hundreds of products despite increased costs from suppliers and foreign markets.
However, this competition mostly ended by the end of April due to special offers expiring.
READ MORE: Food bills likely to rise as Norwegian retailers end price guarantee offers
Now, supermarkets are expected to raise prices to account for the increased costs from suppliers and costs in foreign countries from which Norway imports food.
Several industry experts believe the chains will draw out price increases over a few months to avoid consumer backlash.
Signs of inflation flattening out
Financial analysts believe that, while inflation remains problematic, there have been signs of it flattening in the overall economy.
"Price growth is still high, but in recent months we have seen signs of a flattening," section manager Espen Kristiansen at the SSB said.
Kyrre M. Knudsen at Sparebank 1 SR-Bank agrees: "Price growth has stabilised and not continued to grow as many have feared. However, it has really taken hold at a level that is sky-high above the target."
However, despite signs of stabilisation, the fact remains that the rise in prices is higher than expected – which will very likely lead to more interest rate hikes.
"I think the Central Bank is concerned that prices outside of energy continued to rise instead of falling back in April. The most important reasons are, of course, a weak krone and high wage negotiation settlements, but today's inflation figures join the series of factors that point towards a higher interest rate peak that was originally expected," chief economist Kjersti Haugland at DNB Markets told Norwegian newswire NTB on Wednesday.
Haugland says the new SSB price growth figures strengthen DNB's expectation that there will be three more interest rate hikes this year - in June, August, and September so that the key policy rate ends up at 4 percent.
Commercial banks tend to follow the interest rate hikes made by Norway's Central Bank (Norges Bank), which means that mortgage loan repayments are also likely to become more expensive this year.
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On Wednesday, Statistics Norway (SSB) released figures on price growth in the country over the past twelve months.
From April 2022 to April 2023, prices in Norway rose 6.4 percent. The SSB pointed out that food and drink prices contributed significantly to the high price increase, while electricity prices slowed price growth.
The figures show that increased food prices contributed the most to the inflation in the last year: from April 2022 to April 2023, the prices of food and non-alcoholic beverages rose by 10.5 percent.
Between March and April 2023, food and non-alcoholic beverage prices rose by 2.5 percent.
"Only once before has a larger monthly change been measured from March to April, so this may indicate that something more than just the price spike after the Easter offers is fuelling the big price rise," section manager Espen Kristiansen at the SSB said.
How long will food prices continue to increase?
Many industry experts believe that the worst in terms of food price increases is yet to come, as prices have been artificially low in several big chains due to competition in the run-up to Easter.
Norwegian supermarkets had gone through a price war that started in February when they froze prices on hundreds of products despite increased costs from suppliers and foreign markets.
However, this competition mostly ended by the end of April due to special offers expiring.
READ MORE: Food bills likely to rise as Norwegian retailers end price guarantee offers
Now, supermarkets are expected to raise prices to account for the increased costs from suppliers and costs in foreign countries from which Norway imports food.
Several industry experts believe the chains will draw out price increases over a few months to avoid consumer backlash.
Signs of inflation flattening out
Financial analysts believe that, while inflation remains problematic, there have been signs of it flattening in the overall economy.
"Price growth is still high, but in recent months we have seen signs of a flattening," section manager Espen Kristiansen at the SSB said.
Kyrre M. Knudsen at Sparebank 1 SR-Bank agrees: "Price growth has stabilised and not continued to grow as many have feared. However, it has really taken hold at a level that is sky-high above the target."
However, despite signs of stabilisation, the fact remains that the rise in prices is higher than expected – which will very likely lead to more interest rate hikes.
"I think the Central Bank is concerned that prices outside of energy continued to rise instead of falling back in April. The most important reasons are, of course, a weak krone and high wage negotiation settlements, but today's inflation figures join the series of factors that point towards a higher interest rate peak that was originally expected," chief economist Kjersti Haugland at DNB Markets told Norwegian newswire NTB on Wednesday.
Haugland says the new SSB price growth figures strengthen DNB's expectation that there will be three more interest rate hikes this year - in June, August, and September so that the key policy rate ends up at 4 percent.
Commercial banks tend to follow the interest rate hikes made by Norway's Central Bank (Norges Bank), which means that mortgage loan repayments are also likely to become more expensive this year.
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