Low price inflation on imported goods

The consumer price index increased by 2.3 per cent from 1997 to 1998. Looking at the individual categories, however, we see significant differences. Services with wages as the dominating price factor increased by 7.1 per cent, while prices of imported consumer goods rose on average only 0.7 per cent.

Services in particular contributed to inflation last year, with services with wages as a dominating price factor rising the most. This can probably be attributed to the strong growth in wages in 1998.

Weakened exchange rate and low raw material prices

It may seem paradoxical that while the import-weighed exchange rate gradually weakened as 1998 unfolded, the contribution to inflation by imported consumer goods diminished during the same period. A variety of factors could be at play here. Due to the Asian crisis, the Norwegian exchange rate gained strength against several Asian currencies throughout 1998. The impact of imported consumer goods from Asia in the consumer price index may be stronger than imports in general. International producer prices and raw material prices also showed declining tendencies in 1998. The weaker Norwegian exchange rate has on the one side probably contributed to more expensive imports, but the crisis in Asia and the low prices of raw materials internationally have had a dampening effect on the price inflation of Norwegian imports.

Higher interest, but stable rents

Rents of tenants increased 2.4 per cent from 1997 to 1998, with most of the increase occurring in the first half of the year. Some analysts predicted faster growth in rents in the latter half of 1998 due to the strong growth in interest levels. This did not happen apparently. Rents in housing cooperatives are controlled to a large degree by the interest trend of Norwegian State Housing Bank loans. These interest rates have not risen as sharply as mortgage rates in general, a fact which is reflected in the consumer price index. The extent to which the housing cooperatives have taken up the offer of fixed interest rates beginning 1 January is uncertain, as is the actual effect of the interest rate increase on the consumer price index in the future.

New Statistics
Consumer price index, 15 December 1998.
Statistics are published monthly in the Weekly Bulletin of Statistics. For more information contact: Frode.Bendiksen@ssb.no, tel. +47 21 09 44 27, Randi.Johannessen@ssb.no, tel. +47 21 09 47 30, or Lasse.Sandberg@ssb.no, tel. +47 21 09 47 16.

Weekly Bulletin issue no. 2, 1999