Higher energy prices

In line with other records reached during summer 2018, the Producer Price Index (PPI) reached its highest level in August since the start of the index series in the year 2000. This follows record high index levels also in June and July. The PPI previously reached similar high levels in January 2014, before the marked drop in the price of crude oil that affected the global economy in the following years.

Weaker NOK gave higher oil price

Following two months of moderate fall in the price of crude oil, the oil price measured in NOK increased about 0.9 per cent from July to August despite the general drop in the price in the global market during this period. During recent months, NOK has weakened against USD, and from July to August the change in the exchange rate contributed to a rise in the price of crude oil. This price increase is thus not reflected in the global market where crude oil is priced in USD.

The price of natural gas measured in USD increased marginally from July to August. Measured in NOK the increase was more pronounced because of the change in the exchange rate.

Market price increase on energy goods

Because of their importance in the Norwegian economy prices on crude oil, natural gas, electricity and refined petroleum products are often important for the development in the PPI, which was also the case in August 2018. Despite lower prices in several important manufacturing products such as food products and basic metals, higher prices on energy goods caused the overall growth in the PPI. The PPI is nearly 23 per cent higher in August 2018 compared to twelve months earlier, which is due to the substantial increase in prices of crude energy goods, refined petroleum products and electricity. All these groups experienced price growth between 44 and 66 per cent over the previous twelve months.

Lower prices of basic metals, high index value

Norway is the largest producer of primary aluminium, and the price of aluminium is therefore important to the economy of several Norwegian manufacturing enterprises. Production of basic metals is in general an important industry in Norway, and within this industry aluminium is the most important. In July and August prices of basic metals fell somewhat, and thus reduced the overall growth in the PPI. Lower prices on non-ferrous metals, including aluminium, contributed a lot to this decrease. However, as shown in figure 2, the reduction in prices comes from a quite high index level and despite the drop in prices in August, prices on basic metals are still higher compared to the previous years.