Producer price index, 15 August 2006

Following a dry summer, Norwegian water reservoirs used for producing hydro-electricity were reported to be at unusually low levels in August. At the same time power production in Sweden, one of Norway's main sources of imported electricity, and other European countries was below normal levels. This led to relatively high increases in both spot and forward prices at NorPool, the Nordic electricity exchange. The situation is reflected in a 25.2 per cent jump in the index for electricity from July to August. This is the highest one-month increase in the index since the so-called energy-crisis in the winter of 2002/ 2003. The growth of this sub-index over the past twelve months is an eye-catching 84 per cent.

On the other hand, the oil price, which is one of the main components of the Norwegian PPI, fell during the past month. Both the index for crude oil and natural gas and the one for refined petroleum products decreased, by 1 and 2.7 per cent, respectively. Reduced tension in the Middle East may partly explain this development.

The change in the index for manufacturing and mining grew by 0.3 (0 vekst) per cent. In a month of generally falling prices of metals, the metals index saw an increase of 1.9 per cent due mainly to the prices of nickel and silver.

By goods categories the price of electricity is not as noticeable, with a rise in the energy goods index of merely 0.6 per cent from July to August. Prices of investment goods and consumer durables fell by 0.3 and 0.5 per cent, respectively. The consumer non-durables index did not change, while the rise in metals and chemicals prices led to an increase of 1.1 (jegper cent for intermediate goods.

For the domestic market, which includes goods produced and sold in Norway only, the PPI increased by 2.7 per cent from July to August, as it did the month before. The somewhat higher over all growth in the domestic index than the total is due to the lower weight given to oil prices in the former index. Otherwise, the development of prices were fairly similar in the domestic and export markets.

August 2005 to August 2006: A total rise of 8.8 per cent

The reduction of oil petroleum prices led to a lower twelve-month index increase in August than the previous month. Still, prices of crude oil and natural gas, chemicals, metals and electric power have seen significant increases over the past twelve months, contributing to a rise of 8.8 per cent in the total index. Prices in manufacturing and mining have grown a little less than this, with 7.1 per cent, highlighting the relatively large changes in commodity and energy markets over the year.