Producer price index, 15 March 2007

Oil markets reacted to increasing tension in the Middle East in the end of March, raising oil prices. The 3.5 per cent growth in oil and natural gas prices from February to March contributed to an increase of 1.8 per cent in the overall producer price index. The price of electricity, on the other hand, fell by 16.8 per cent, continuing its descent from a peak in August last year.

Prices of most food products decreased from February to March. The indices for fruit/ vegetables and fish were both almost 2 per cent lower. Prices of meat and meat products, however, increased enough to bring the index for food products and beverages up 0.2 per cent. This is related to the development in prices of pork. The official co-ordinating body for agricultural production projected a surplus of pork in the beginning of the year, and thus significantly reduced the prices producers receive. Demand in March was high, and prices were adjusted back up.

After a period of relatively high price increase, the wood and lumber index fell 0.4 per cent from February to March. The index for chemicals and chemical products also saw a setback, falling 1.4 per cent after a long period of growth.

Prices of iron and steel increased considerably last year, but seem to have stabilized somewhat during the last months. Prices of non-ferrous metals, however, are still increasing. The index for the latter group, dominated by prices of nickel and aluminium, grew enough to offset the fall in iron and steel prices, yielding a 2.4 per cent increase in the index for basic metals. The past development in iron and steel prices may have contributed to increases in the indices for machinery and fabricated metal products, which grew by 0,1 and 0.4 per cent respectively, from February to March.

The producer price index for the domestic market shows a decrease of only 0.2 per cent. This reflects the relatively larger influence of electricity prices in the domestic market, rather than any significant discrepancies in price developments in the domestic and export markets. The index for basic metals is one exception: For the domestic market these prices were virtually unchanged from February to March. The sub-index for non-ferrous metals showed opposite changes in the domestic and export markets, with a domestic fall of 0.1 per cent.

The twelve-month change: A fall of 2.2 per cent.

Compared with March 2006 the over-all producer price index is down by 2.2 per cent. The fall is mainly due to lower energy prices. The index for crude oil and natural gas is 6.5 per cent lower than twelve months ago, despite last month's increase, while the price of electricity is down a noticeable 46.9 per cent. Related to the development in oil prices, the index for refined petroleum products has seen a decrease of 4.2 per cent. All other industry indices have positive growth rates over the twelve-month period. The basic metals index stands out with an increase of 32.7 per cent. The prices of basic metals may also have affected the index for electrical end optical equipment. While prices of office machinery and computers have fallen, prices of insulated wire and cable and some electrical machinery have increased enough to yield a 0.2 per cent rise in the index for electrical and optical equipment.