Food prices suddenly fall

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Norway’s notoriously high food prices have become a bit easier to swallow. State statistics bureau SSB (Statistics Norway) has confirmed that they declined rather suddenly during the summer, to a degree that also has brought declines in both the country’s consumer price index (CPI) and its inflation rate.

There’s often a rush of fresh fruit and vegetables on the market in August as early harvests come in. Prices have also fallen, however, on cheese and even chocolate, probably because of stronger competition among grocery store chains. PHOTO: Landbruks- og matdepartementet

Newspaper Dagsavisen reported this week that food prices fell by 3.4 percent from July to August, according to the latest numbers from SSB. Nearly all food products along with various beverages registered price declines, with prices for cheese, yoghurt, fresh berries and even chocolate falling the most.

SSB’s analysts noted that grocery stores often have special advertising campaigns and offers in August, which also coincides with early harvest in Norway and more fresh fruit and vegetables in the stores. SSB also noted the new price decline applied to a broader spectrum of food items traditionally featured in promotional campaigns.

Since many Norwegian food products come on the market in August, tariff barriers against foreign imports go up, meaning that some items like tomatoes and celery usually get more expensive. This year the price of celery did rise, when imported celery from abroad disappeared from local grocery store shelves, but not by as much as in earlier years. In some years, celery from southern Europe that sold for around NOK 12 has been replaced with celery from Norway priced at nearly NOK 30. This year the Norwegian celery has been selling at around NOK 20, still nearly double the price of imported celery but less onerous than last year.

Berry boom
There was also a rush of fresh Norwegian raspberries on the market this summer, a result of a jump in raspberry (bringebær) production. The price of Norwegian strawberries stayed relative high because of lower supplies, but raspberry prices fell.

SSB reported that while food prices fell 3.4 percent from July to August, the decline was just 1 percent last year.

Ingvill Størksen of the employers’ association Virke thinks the food price decline reflects strong competition between Norway’s major grocery chains. Just three dominate the market (NorgesGruppen, Coop and REMA) and they’ve been criticized for years for having too much market power both on the wholesale and retail sides. There’s lately been some serious ad campaigns and price battles going on, though.

“Food prices are now nearly 2 percent lower than they were at the same time last year,” Størksen told Dagsavisen. “That underlines how competition between the Norwegian grocery chains is strong.” The price decline comes despite the annual “pay raises” granted to Norwegian farmers following their negotiations over state subsidy and tariff protection.

‘Big surprise’
Størksen called the food price decline this summer as “sensationally high,” and said the prices for many food products and non-alcholic beverages have declined all year long.  Norway’s CPI fell by 0.8 percent from July to August, mostly because of the food price decline, according to SSB. It rose by just 1.3 percent during the last 12 months.

That’s left Norway with a core inflation rate of just 0.9 percent for the last 12 months, lower than the 1.1 percent that the country’s central bank (Norges Bank) had expected. The core inflation rate is an important factor when Norges Bank’s board sets its key lending rate.

Nordea Markets also called the fall in food prices “a big surprise,” and confirmed that drove down the core inflation rate. “We have no good clarification as to why food prices fell so strongly,” Nordea wrote in its own analysis, “but they have been volatile in recent years, probably because of price competition.”

newsinenglish.no/Nina Berglund