With the recent release of economic data from the Nordic countries, many Nordic consumers are beginning to realise that the increase in the cost of living is not an illusion, and that inflationary pressures are gradually being transmitted and eventually reflected directly in the prices of the food people consume every day.
Price hikes and "downgrading" of consumption
For some time now, many Finnish residents have been feeling the pinch when it comes to shopping, as the prices of many food items have been rising since last year, with no end in sight. A local media report on a consumer in Turku who has been spending money on food for a year shows that almost all food prices have risen in the past year. The consumer, named Kea, gave the example that the price of a packet of chicken cutlets, which was €2.69 in January 2022, had risen to €3.89 in July and had risen to €4.29 in December.
Official statistics from Finland provide more evidence of how residents feel about their consumption. Statistics Finland released data showing that the overall inflation rate in Finland was 9.1 per cent at the end of December 2022, while food inflation reached 16 per cent. Price increases were particularly reflected in food prices, which were 16.5 per cent higher in December 2022 than a year earlier. Kristina Nieminen, chief actuary at Statistics Finland, said that the prices of basic foodstuffs had indeed risen, with cheese prices up 25 per cent, egg prices up 37 per cent and butter prices up 36 per cent, and that "everyone has noticed that prices have gone up at the checkout".
The increase in food prices in Finland has subtly changed the consumption habits of the population. Kaia says that the rise in food prices has forced her to give up buying some of the more expensive ingredients and to eat out less often. The Finnish Grocers Association recently released a report saying that Finnish residents will spend significantly less on fish, vegetables and meat in 2022 compared to 2021.
In Sweden, food prices have also risen significantly. The Swedish Food Price Check website published a survey showing that food prices in Sweden rose by 1.4% in January 2023, one of the largest monthly increases since the country's inflation spike in January 2022. Some goods that saw relatively mild inflation last year suddenly became very expensive in January this year, such as onions, which rose by 19 per cent, and tomatoes, which rose by 12 per cent. Also according to figures released by Statistics Sweden last month, Sweden's annualised inflation rate for December 2022 is 12.3 per cent, a figure that is the highest level since February 1991.
Norwegian grocery chains and suppliers have warned that some food prices could rise by 10 per cent from February due to a number of factors. The Norwegian grocery chains traditionally adjust their wholesale purchase prices in February and July each year, so many food prices will change significantly in February. 2021 has seen an 11.5 per cent increase in Norwegian grocery prices since then. At the same time, the Consumer Price Index (CPI), which measures overall inflation, rose by 5.9 per cent between December 2021 and December last year.
Causes and responses
The Bank of Finland's report on expectations for the Finnish economy, published at the beginning of the year, states that inflation in Finland will rise further in 2023. The reason for this is that higher energy and raw material prices and prolonged supply chain disruptions have led to a general increase in consumer prices, and while the fall in crude oil and raw material prices will slow the rise in inflation, high electricity costs will keep price pressures high. Some of the price pressures will spread and eventually transfer to food, consumer goods and service prices. In a consumer confidence survey by the Bank of Finland, respondents felt that this was a particularly bad time for consumers and that consumers' willingness to buy consumer durables was low. If Finland's high inflation persists longer than expected, the cuts in consumer purchasing power and private consumption could be even greater and last longer than expected, which would make the recession even worse than expected.
However, the Finnish central bank report also notes that inflation is expected to slow down in 2023 in terms of expectations, but there is a high degree of uncertainty in the forecast as the price increases in 2022 have spread from energy commodities to other sectors of the economy. For his part, Ülky Nemi, an expert at the Finnish Institute for Natural Resources, analyses that prices should stabilise this year, at least until the end of the year. The rapid rise in food prices last year was influenced by the Russian-Ukrainian conflict and poor crop harvests in some regions. Higher energy prices have indirectly raised prices, as have fertiliser and feed prices, which have affected consumer prices. "If global food harvests return to normal this year, food inflation should stop in the second half of the year."
In Sweden, the economy had previously anticipated continued high inflation, but the recent price data for food and non-alcoholic beverages still took both the Riksbank by surprise. Many analyses point out that the main manifestations of the current recession facing the Swedish economy are falling real incomes and a sharp decline in housing construction. Although Sweden's loose fiscal policy may slow the economic downturn, but high inflation will lead to its difficulties in effectively balancing the economy and people's livelihoods.
For its part, the Norwegian government began meeting with representatives of the chain shop industry in January this year to consult on price increases for key consumer goods such as food, in the hope of making the grocery industry aware of its social responsibility to consumers and ensuring that it makes profits while not harming them. However, the retail industry has its own struggles. Higher costs for energy, transport, commodities and raw materials have forced both suppliers and supermarkets to raise the prices of their products.
