Waiting for food price growth to halve this year – E24

But there is a risk that price pressure on Norwegian goods will be prolonged, according to experts.

Food prices contributed to lower than expected inflation in February.

Changes in the way grocery chains negotiate prices and campaigns contributed to the decline, according to Statistics Norway.

It could have an impact on inflation numbers due on Wednesday morning, according to chief economist Sarah Midtgaard at Handelsbanken.

Back and forth

– If food prices in March are revised upward in line with the decline in February, this will help lift year-on-year price growth, explains Midtgaard.

-Then the effect will reverse slightly.

Food prices usually rise in February and decrease in March. The background is a unique Norwegian negotiation system where the grocery industry negotiated with suppliers over price twicetwiceAlso called “price windows,” they typically result in prices rising on February 1 and July 1 year. Representatives in the grocery industry have now indicated that they will stay away from this.

– So we should not ignore the fact that they use the other months to adjust prices upward, says Midtgaard.

room for competition

Ivar Petersen at Alo-Analyse researches food prices. He believes in moderate price development in March.

– Competition between grocery chains is so intense right now that I don't think there will be any sharp increase.

Part of the backdrop is that 2023 ended with higher price increases for consumers than in other lower parts of the grocery industry, according to Petersen.

– This shows that the shops have little to go on. It's also not that grocery chains are coming out of 2023 poorly, he adds, even if there are some differences.

This created room for price competition at the beginning of the year. In addition, a significant reduction in price pressure on imported food items is expected, according to the industry expert.

The risk of continued price pressure

However, Petersen believes that prices of food produced in Norway may rise further from July onwards.

– There are two reasons for this. The first is the wage adjustment, which ended up being over 5 percent. The other is Agricultural agreementAgricultural agreementThe result of annual negotiations between the state and agriculture. Starting from July 1st. Establishes framework conditions for Norwegian agriculture. I think we will get an increase in Norwegian raw material prices of at least 5 percent.

Therefore, it does not seem that food inflation will fall below 4 percent in 2024, according to the expert. He points out that it is still more than half that of last year.

Food prices then rose by 10 percent, according to Statistics Norway.

— There is still a long way to go to achieve Norges Bank's target in terms of overall price increases. It's a long way from 4% to 2.5%, and I don't think food inflation will get there in 2024.

-Do you think this will happen in 2025?

– This is the “chicken and the egg.” If food prices and inflation eventually rise to more than 4 percent, the wage settlement should be very high next year, which in turn will affect food prices and price supplements in the agricultural settlement.

Petersen says the government has committed itself to ensuring the pay gap between farmers and other occupational groups is closed over a few years.

– This means that there is a risk of continued price pressure on Norwegian food products. National factors are driving the price rise now.

– It will help reduce price inflation

After inflation reached 4.5% in February, analysts expect inflation to fall to 4.2% in March, according to a Bloomberg survey. The core inflation rate is expected to decline from 4.9 to 4.7 percent.

Even if food prices contribute to the cold showers in March, Medtgaard also believes they will decline in the long term.

– From a slightly longer perspective, we will see that the increase in food prices in particular will help limit the overall increase in prices.

Like Petersen, Medtgaard links this to falling import prices. But it also indicates that lowering prices for Norwegian-made goods will take longer:

Wage growth is high and weak Productivity growth Productivity growth Productivity is about the amount of resources used to produce something. Growth in productivity means you get more of the same resources. Makes it difficult to obtain.