Swedbank: Price pressures are easing

SwedbankIn April, consumer prices increased by 13.5% compared to the same month last year and by 2.0% compared to the previous month. Compared to last month, prices rose quite a lot due to the end of government energy subsidies to households. In April, the automatic compensation scheme for electricity and district heating came to an end. The price of gas had already fallen below the compensation threshold.

Food prices have risen by 23.4% in a year and by 41.4% in two years. While food producers have stopped lifting their output prices, food stores see more price hikes ahead due to their very low profit margins. Energy prices have moderated. While the price of electricity is still relatively high due to elevated CO2 quota prices, gas and motor fuels cost less than a year ago.

In the summer months, annual inflation should fall below 10% and by the year end, close to 5%. The decrease in the prices of energy, commodities, and international transport will ease price pressures, as do lower household purchasing power, higher interest rates, and weak GDP growth prospects.

In 2023 overall, prices are expected to grow by 10%. As the average net wage should increase less than that (+8% in 2023, according to our estimates), the average wage earner’s purchasing power is expected to decrease for the second year.

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