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Tuesday, June 18, 2024

Inflation declines, but food prices rise

Norway’s consumer price index (CPI) fell for the fifth month in a row in May, aided by a sharp reduction in electricity rates and new car prices. The country’s notoriously food prices, though, rose yet again and are likely to rise even more after Norwegian farmers won more subsidy and tariff protection.

The prices of nearly all food items have gone up substantially over the past two years, also in the latest inflation report, but not as much as earlier. PHOTO: NorgesGruppen

State statistics bureau SSB (Statistics Norway) reports a CPI of 3 percent, down from 4.8 percent in May of last year. Energy costs have tumbled, after lots of snow last winter and recent heavy rain filled up reservoirs that help generate the country’s hydroelectric power. May was also unusually warm over much of the country, reducing the need for indoor heating, and gas supplies in Europe are ample, reducing the need for energy imports from Norway.

New car prices, meanwhile, fell by 2.1 percent from April to May, the largest monthly price reduction since the 1990s and fueled, according to Espen Kristiansen of SSB, by lower demand and sales. Prices also fell for furniture, housewares and telecommunications.

It was all enough to cheer government officials who’ve otherwise found themselves unpopular and under constant criticism. “The government’s goal is for everyone to have better personal economy,” Prime Minister Jonas Gahr Støre of the Labour Party told state broadcaster NRK. “It’s good that price growth continues to fall, at the same time that unemployment remains low.”

Støre’s finance minister, Trygve Slagsvold Vedum of the Center Party, has also been claiming that economic development in Norway is on track and that Norwegians face better times ahead. The country is already viewed internationally as among the most prosperous in the world, but Vedum and Støre have been under fire as the cost of living kept rising and purchasing power declined.

Finance Minister Trygve Slagsvold Vedum is originally a farmer and supports more state aid for Norwegian farmers, even though that leads to higher food prices for consumers. PHOTO: Senterpartiet

Now most Norwegian workers have negotiated pay raises of around 5.2 percent while price growth finally slows. “We made a lot of tough decisions in the fall of 2022 that sparked debate,” Vedum told news bureau NTB, “but we avoided high unemployment. “Now we’re seeing that things we’ve worked hard for are beginning to happen.”

In addition to higher incomes and lower prices, he claimed, many households will benefit from lower energy costs, higher child support, lower day care costs and higher pension benefits, among other factors.

Food prices, however, rose another 5.4 percent from May 2023 to May 2024. The actual price rise has eased, after shocking increases last year and the year before, when a liter of milk rose to over NOK 20, the prices of many cheeses jumped 20 percent or more, and everything from eggs to bread to meat and poultry were up by at least as much, if not more.

Many producers responded by keeping prices stable or imposing less onerous price hikes, but reducing the quantity of food in the same packages. Consumers buying bacon or marinated turkey slices, for example, opened the packages to find fewer of both, even though the price of the turkey sold for summer grilling this year rose from NOK 89 to NOK 99 even at the cheapest grocery stores. Now many consumers need two packages instead of just one.

Food prices are bound to rise again, after Norwegian farmers won a new agreement with the state that’s costing taxpayers more than NOK 3 billion. It’s not as much as what the farmers demanded, but it’s aimed at boosting farmers’ income, keeping them farming and securing Norway’s self-sufficiency.

Bjørn Gimming (center), leader of the large farmers’ organization Norges Bondelag, is relatively pleased with the recent results of financial negotiations with the state, represented here by Viil Søyland of the agriculture ministry. Tor Jacob Solberg (left), leader of the national organization for small farmers, was skeptical and wanted even more support for farmers.  PHOTO: Norges Bondelag

“The agreement is important for encouraging farmers to still be motivated to produce food and dare to have faith in a future,” claimed Bjørn Gimming, leader of Norway’s powerful farm organization Norges Bondelag. The state aid is meant to boost farmers’ income by an average NOK 60,000 a year, and narrow the dispute gap between farmers’ annual pay and that of other workers.

The farmers’ lobby itself concedes that the total package (which includes more tariff protection from cheaper imports) will increase prices for milk, grain and potatoes, by around NOK 400 a year per household in Norway. Norwegian shoppers, meanwhile, continue to face current shortages of both potatoes and eggs, and higher prices on dairy products, all of which are subject to organized production controls instead of the free market.

NewsinEnglish.no/Nina Berglund

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