What Norway's latest inflation figures mean for your finances
Norway's inflation figures tell us a lot more than how much prices are rising; they can also offer a key look into your future finances and which costs will continue growing in the coming months.
Norway's consumer price index for June 2023 is up 6.4 percent compared to the same month a year ago, figures from the national data agency Statistics Norway show.
Over the previous five months, inflation figures have averaged around 6.5 percent compared to prices 12 months before.
Unusually high food prices were one of the key drivers behind the latest figures. Over the past year, the cost of groceries in Norway has increased by 13.7 percent.
"It is unusual for food prices to increase so much in the month of June. This means that the twelve-month growth for food prices increased in June from an already high level in May," Espen Kristiansen from Statistics Norway said.
The cost of fruit and vegetables helped to drive up food prices. A weak krone meant that imported foods were more expensive.
"Some of the upswing we see in June may be due to a weakened krone exchange rate. The prices of imported agricultural goods rose clearly more than Norwegian agricultural goods in the last month," Kristiansen said.
Food price rises to continue
Experts have recently told The Local that a weak krone exchange rate would continue to put pressure on food prices and inflation in the coming months.
"There will be an effect. As you know, a lot of our food is imported, and that will put upward pressure on food prices in Norway. We think this will last for at least the next couple of quarters in terms of adding upward pressure on food prices.
"Eventually, depending on the (interest) rate movements (which strengthen the krone) from now on, we will see changes. If we see a further weakening of the krone, that will add more long-lasting pressure," Nils Kristian Knudsen, forex (FX) strategist at Handelsbanken, told The Local.
Furthermore, the way that food prices are adjusted appears to have changed. Typically, supermarkets in Norway have adjusted wholesale prices twice a year. Once in February and once in July.
Now though, it appears like supermarkets will continually adjust their prices. This means more dynamic price rises.
"If the chains move away from this system, shop prices will probably react more quickly when raw material prices change, and we will see a more dynamic change in prices," Øystein Foros at the Norwegian Business School told the Norwegian newswire NTB recently.
For households, this means more constant food price rises when the krone is struggling and raw material prices are high. This means customers will need to become better at continually spotting which items are becoming more expensive rather than waiting for the traditional price rise windows.
Interest rates to rise
The latest inflation figures were higher than economists were predicting. For this reason, they believe that a double interest rate hike is possible in August.
"This does not calm Norges Bank's nerves. Market pricing now indicates an interest rate peak of between 4.25 and 4.5 percent," Sara Midtgaard, a senior economist from Handelsbanken, told business news publication E24.
She added that a double interest rate was likely as core inflation, which is adjusted for tax and energy prices, was also higher than initial forecasts.
A double interest rate rise would see the key policy rate rise to 4.25 percent. This means more expensive loan and mortgage repayments and it being harder to get on the property ladder. This, in turn, could slow down rising house prices.
Lower disposable income due to rising interest rates also means a slower economy. Norway's central bank, Norges Bank, has been using higher interest rates to try and curb inflation. Higher than forecast inflation means that interest rate hikes remain necessary.
Experts The Local has spoken to have said that the market believes that the plan to bring down price rises could work.
However, they added it was likely that this would take time to actually happen.
This is something that Midtgaard has also said. She expects there to be long-time core inflation.
"(I) can probably see a high underlying price increase in the Norwegian economy for a period of time," she said.
Comments
See Also
Norway's consumer price index for June 2023 is up 6.4 percent compared to the same month a year ago, figures from the national data agency Statistics Norway show.
Over the previous five months, inflation figures have averaged around 6.5 percent compared to prices 12 months before.
Unusually high food prices were one of the key drivers behind the latest figures. Over the past year, the cost of groceries in Norway has increased by 13.7 percent.
"It is unusual for food prices to increase so much in the month of June. This means that the twelve-month growth for food prices increased in June from an already high level in May," Espen Kristiansen from Statistics Norway said.
The cost of fruit and vegetables helped to drive up food prices. A weak krone meant that imported foods were more expensive.
"Some of the upswing we see in June may be due to a weakened krone exchange rate. The prices of imported agricultural goods rose clearly more than Norwegian agricultural goods in the last month," Kristiansen said.
Food price rises to continue
Experts have recently told The Local that a weak krone exchange rate would continue to put pressure on food prices and inflation in the coming months.
"There will be an effect. As you know, a lot of our food is imported, and that will put upward pressure on food prices in Norway. We think this will last for at least the next couple of quarters in terms of adding upward pressure on food prices.
"Eventually, depending on the (interest) rate movements (which strengthen the krone) from now on, we will see changes. If we see a further weakening of the krone, that will add more long-lasting pressure," Nils Kristian Knudsen, forex (FX) strategist at Handelsbanken, told The Local.
Furthermore, the way that food prices are adjusted appears to have changed. Typically, supermarkets in Norway have adjusted wholesale prices twice a year. Once in February and once in July.
Now though, it appears like supermarkets will continually adjust their prices. This means more dynamic price rises.
"If the chains move away from this system, shop prices will probably react more quickly when raw material prices change, and we will see a more dynamic change in prices," Øystein Foros at the Norwegian Business School told the Norwegian newswire NTB recently.
For households, this means more constant food price rises when the krone is struggling and raw material prices are high. This means customers will need to become better at continually spotting which items are becoming more expensive rather than waiting for the traditional price rise windows.
Interest rates to rise
The latest inflation figures were higher than economists were predicting. For this reason, they believe that a double interest rate hike is possible in August.
"This does not calm Norges Bank's nerves. Market pricing now indicates an interest rate peak of between 4.25 and 4.5 percent," Sara Midtgaard, a senior economist from Handelsbanken, told business news publication E24.
She added that a double interest rate was likely as core inflation, which is adjusted for tax and energy prices, was also higher than initial forecasts.
A double interest rate rise would see the key policy rate rise to 4.25 percent. This means more expensive loan and mortgage repayments and it being harder to get on the property ladder. This, in turn, could slow down rising house prices.
Lower disposable income due to rising interest rates also means a slower economy. Norway's central bank, Norges Bank, has been using higher interest rates to try and curb inflation. Higher than forecast inflation means that interest rate hikes remain necessary.
Experts The Local has spoken to have said that the market believes that the plan to bring down price rises could work.
However, they added it was likely that this would take time to actually happen.
This is something that Midtgaard has also said. She expects there to be long-time core inflation.
"(I) can probably see a high underlying price increase in the Norwegian economy for a period of time," she said.
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.