Producer price index, May 2015

The overall producer price index (PPI) has levelled off over the past two months, following a few months of increase. The growth in February and March was due to increasing prices of oil products, which continued on an upward trajectory in May. The oil price is still low, however, relative to the level before a steep decline started last year.

The general picture did not change much from April to May: falling prices in important manufacturing industries have countered the rise in petroleum prices. For the metals industry, prices fell by 1.4 per cent, and for computer and electrical equipment the decline was 1 per cent. A lower price of natural gas has dampened the increase for the extraction industry for the past two months. Services related to mining and extraction have also seen prices decline in April and May.

Increase in food and metals prices since last year

Last autumn and winter, the general development was the opposite of what we have seen since February: prices of crude oil and refined petroleum products fell drastically, while rising prices in the following manufacturing industries dampened the decline in the overall index:

• Basic metals
• Food products
• Chemical products
• Computer and electrical equipment

The price increases in these industries coincide with a relatively sharp depreciation of the Norwegian krone (NOK). For Norwegian exporters whose prices are set in foreign currencies, this would contribute to them getting more for their products, measured in NOK. The indices for metals and computer and electrical equipment sold in the domestic market show somewhat lower price increases than the total indices, which include exports, for the same industries. The differences are not very large, however, so the currency depreciation cannot be the sole explanation for the general price increases in these industries.

The oil price brings the overall index down

The decline in the price of oil has led to the overall PPI being 4.8 per cent lower in May than in the same month last year, despite prices increasing in other industries. Higher prices for fish, meat, fruits and vegetables have led to a 7 per cent increase in the index for the food industry. Metals prices were 17.6 per cent higher than 12 months earlier. Prices of basic chemicals are usually variable from one month to the next, but compared with May last year they were 5.8 per cent higher in the same month this year.

Lower increases than in April

For most of the important manufacturing industries with relative strong price increases, the twelve-month rates in May were lower than they were in April. This means that although these industries have prevented the overall PPI from falling more steeply, the contribution was weaker in May than in April. The exception was chemical products, where prices had a stronger 12-month growth rate in May than in April. But as mentioned above, these prices are quite volatile, so it is difficult to see a clear trend.

Despite the growth in prices for the aforementioned industries, the PPI for manufacturing industries fell by 0.1 per cent from May 2014 to May 2015. The decline is mainly due to a fall of almost 19 per cent in prices of refined petroleum products. The electricity price fell by 6.9 per cent from April to May, which is not unusual for this time of year. Compared with May last year, the electricity price was 3.2 per cent lower in May this year, which also contributed to bringing the overall PPI down.