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Will smaller production costs lead to lower food prices in Sweden?

TT/The Local
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Will smaller production costs lead to lower food prices in Sweden?
Electricity costs decreased for producers last month. Could this have a knock-on effect on food prices? Photo: Johan Nilsson/TT

Costs for food producers dropped in February for the second month in a row. Does this mean food prices will drop soon?

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In February, food production costs dropped by 1 percent on the month before, slightly less than in January - where costs for producers dropped around 5 percent on the previous month.

However, compared with a year ago, prices are still higher. Year on year, costs for producers went up by 9.3 percent in February. This was lower than in January, where the production costs increased 11.8 percent compared to January 2022, according to new data from Statistics Sweden.

Torbjörn Isaksson, head analyst at Nordea bank, underlined the fact that costs are still high across the board.

"Even though production costs in the industry are going down, pressure on prices is still high - much higher than the levels seen before the pandemic," he said.

Low energy prices behind the drop in production costs

On the domestic market, costs decreased 1.1 percent in February compared with January. On the import market, this figure was 0.4 percent.

"The biggest contributor to the decrease on the domestic market was lower prices on the energy market," Statistics Sweden wrote. "This decrease was lessened due to increasing prices on vehicles, trailers and other machines."

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The decrease in costs on the import market can be explained by lowered costs for crude oil and refined oil products, with price drops on natural gas, computers and some chemicals also affected. Again, these decreases were lessened by increases on other items, such as vehicles, food, medicines and steel.

Delayed effect in supermarkets

Isaksson highlighted the fact that production and import costs on consumer goods increased in February compared to January.

"It's an interesting, if not perfect, indicator for inflation," he said. "The price increase there is probably to a large extent a result of the weak krona."

"It's a bit disappointing that prices on consumer goods continued to rise," he added. "The central bank would of course rather have seen a decrease on the price of consumer goods."

Isaksson did say, however, that a change in production and import costs of this size could be noticeable in the supermarkets soon.

"There's usually a delay of a month or two."

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