Final figures for March inflation confirmed the downside surprise in core inflation and energy. The larger decline in energy was attributed to a steeper fall in electricity prices than anticipated, while fuel prices surged as expected. Within services, holiday-related prices fell, accounting for most of the surprise in this category. Food prices fell broadly and more than they usually do given the season. The decline was most prominent in dairy products, reflecting lower world prices and a stronger currency last year (see chart below). Even with the low March figure, we still expect full effect on food prices from the lowered VAT in April, and data from Matpriskollen confirm this view (see chart below). It is important to note that Matpriskollen measures prices differently from Statistics Sweden, as it does not account for offers or sales campaigns, which Statistics Sweden does. However, since the reduced VAT impacts regular prices, Matpriskollen’s predictions are likely to be more accurate than usual.
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