March turned out to be a dramatic month for food prices. After several years of price increases, the trend reversed sharply, with a double effect from lower dairy prices and reduced food VAT, resulting in the greatest drop in food prices in 30 years.
The fact that regular prices on over 43,000 everyday goods fell by 2.8 percent, and food prices by 4.1 percent, means that food prices dropped significantly more than the whole assortment of goods. Two factors are cited as reasons for this – Arla’s price reduction at the beginning of March and the lowered food VAT from twelve to six percent, which many chains chose to implement already during March.
According to Matpriskollen, this is the largest price fall they have recorded for a single month.
– All focus was on the VAT reduction itself on April 1, and many chains reduced their prices up to a week in advance. Therefore, Arla’s major dairy price change at the beginning of March and the price freeze introduced by several chains went a bit under the radar. Taken together, this meant that regular prices on food items were already down by -4.1 percent the day before the VAT was reduced, says Ulf Mazur, CEO and founder of Matpriskollen.
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Matpriskollen has closely monitored several retail chains in recent weeks to ensure that the VAT reduction has truly reached consumers, and Ulf Mazur is satisfied.
– We’ve checked Coop’s stores, Lidl, and Willys, and here the reduction has been fully implemented and they have received a certificate to display at the entrance. For other retail chains, we can only comment based on what we see in our other figures, but they have also reduced their prices by at least 5.36 percent, so the implementation has been really good.
Coffee Expected to Become Cheaper
Mazur also points out that there is more to gain from the VAT reduction in April since many of the private stores waited until the very last day to lower their prices.
When it comes to product categories such as personal care, cleaning, pet food, and baby products—which are not covered by the VAT reduction—prices remained unchanged.
The largest reductions in March were seen in dairy products. Looking ahead, however, price increases are expected.
– Compared to a year ago, it’s dairy products and olive oil that have become much cheaper, while beef, berries, and coffee are still much more expensive. Coffee should drop in price in the coming days, while the beef shortage continues to be an issue and is driving up prices, says Ulf Mazur.