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MONEY

Sharp rise in food prices in Norway linked to lack of competition

Several everyday items in Norwegian supermarkets from sausages to milk have jumped in price this month. The Consumer Council has said that the rises are a sign of a lack of competition in the Norwegian grocery market.

A supermarket.
Norway's consumer council has said that price rises could potentially be linked to a lack of competition. Pictured is a supermarket. Photo by gemma on Unsplash

Since the beginning of February, many everyday items in supermarkets have increased by 10 percent or more, public broadcaster NRK has reported.

NRK compared prices of several items from different supermarkets before and after the turn of the month.

Beer, cheese, butter, sausages, soda, porridge oats and kitchen roll were among the household essentials to receive a price hike.

Some products, such as shrimp salad—a popular pålegg, or sandwich spread– rose in price by as much as 40 percent.

Online news site Nettavisen has also reported steep price rises in February. Supermarkets in Norway typically adjust their prices twice a year, once in February and then once again in July.

READ ALSO: Why is food in Norway so expensive?

The Consumer Council, which advocates consumer rights, has said that the significant price hikes are due to a lack of competition.

“The competition in the Norwegian food market is obviously too bad. It has been for a long time, and it is documented here (through reports of price hikes), Inger Lise Blyverket, director of the Consumer Council, told public broadcaster NRK.

She said that the lack of choice made it hard for consumers to vote with their feet and opt for cheaper alternatives.

“This makes it impossible for us to exercise our power as consumers, by choosing cheaper alternatives. When chains and other players in the grocery industry claim there is fierce competition, it isn’t true. Tough measures are needed,” Blyverket said.

Director of the Consumer Council, Blyverket, said that the price rises are a bitter pill to swallow, especially given that supermarkets turnovers increased sharply during the pandemic.

However, supermarkets have said they’ve been forced to raise prices as suppliers are charging more than before due to several factors.

Higher raw material prices internationally, increased shipping costs, high electricity prices, and Norwegian agriculture raising the prices of their products have meant suppliers have passed the cost onto supermarkets, which supermarkets, in turn, pass onto customers.

However, some have said that supermarkets are raising their prices beyond the additional costs passed on by suppliers.

“They (the suppliers) have found that prices in grocery stores are increasing more than the additional costs that grocery chains are paying for products,” Sigurd Birkeland, from the Norwegian Competition Authority, told NRK.

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MONEY

What Norway’s double interest rate hike means for your finances 

Norway's central bank raised the key interest rate by 0.5 percentage points for the first time in 20 years, and experts have warned there will be several knock-ons for households. 

What Norway's double interest rate hike means for your finances 

Earlier this week, Norway’s central bank, Norges Bank, raised the key policy rate from 0.75 percent to 1.25 percent. 

“We understand that some are concerned when we announce such a rapid rise in interest rates. For some, it will be demanding, but most households have the finances to pay the loan with a slightly higher interest rate,” governor of the bank, Ida Wolden Bache, told public broadcaster NRK

Norges Bank also announced that the key interest rate would be raised again in August to 1.5 percent. The bank said it was raising interest rates to curb high inflation. 

“The committee’s assessment is that there is a need for a clearly higher interest rate to stabilize inflation around the target,” a press release announcing the rise stated. 

Inflation in Norway rose to its highest level since 1988 last month, figures from Statistics Norway show. The Consumer Price Index for May showed that prices were 5.7 percent higher than they were a year ago.  

READ MORE: Inflation in Norway reaches its highest level since 1988

By next summer, Norges Bank expects the key policy rate to be raised to around 3 percent. 

The Forecast Centre, which offers financial analysis, told newswire NTB that the rapid rate rises would lose to an uncertain time for households. 

“The most vulnerable households will enter a period of considerable uncertainty. There is no way around it,” chief economist Nerja Macic told NTB. 

There are around 436,000 financially vulnerable households in Norway, according to figures from the national stats agency Statistics Norway. A vulnerable household has debts three times higher than its income and less than 100,000 kroner in the bank. 

Norway’s Real Estate Association said that young homeowners and first-time buyers could also struggle due to the interest rate rises. 

“Many have incurred a very high debt ratio in anticipation of low-interest rates for many years. With today’s interest rate forecast, many must prepare for significantly higher interest costs than they were predicted when they received their first mortgage,” Carl O. Giving, CEO of the Real Estate Association, told newswire NTB. 

“At the same time, the threshold to the housing market will be very high for many first-time buyers who are allowed to borrow less when interest rates rise,” he added. 

A key interest rate of 1.25 percent means yearly repayments of 12,500 kroner per million of debt. For example, for million kroner of debt at an interest rate of 1.25 percent means annual repayments of around 50,000 kroner per year. 

This week’s rate rise meant repayments would rise by 5,000 kroner per year for every million one owes, in theory at least. 

However, banks typically lend at above the key interest rate, meaning payments will be higher than the current 1.25 percent key policy rate. 

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