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What Norway's latest inflation figures mean for your finances

Frazer Norwell
Frazer Norwell - [email protected]
What Norway's latest inflation figures mean for your finances
Fresh inflation figures have shown that price rises have slowed for a fifth consecutive month. Pictured is a person shopping in a supermarket.Photo by Juliana Mayo on Unsplash

Inflation in Norway has slowed for the fifth consecutive month. Despite this, the figures could be a mixed bag when it comes to how they will affect your finances.

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Norway's Consumer Price Index (CPI) rose by 3 percent between May 2024 and the same month a year ago, figures released by national data agency Statistics Norway show.

The figures mark the fifth month in a row in which the CPI, a measure of inflation, has been lower than the 12 monthly figure from the month before.

Since December, the 12 monthly inflation figure has fallen from 4.8 percent to 3 percent.

Inflation in Norway is still rising and things are becoming more expensive, but this has been happening at a much slower rate in recent months, especially compared to the yearly inflation peak of 7.5 percent in October 2022.

The figures come with good news and bad news for consumers in Norway.

READ ALSO: Is Norway really better off than Sweden right now?

Starting with the good news, slower inflation means that many Norwegian workers will benefit from a real wage increase this year. Workers in Norway are expected to receive an average increase of 5.2 percent, while inflation is expected to be around 3.9 percent.

Without any big surprises in terms of inflation slowing or rapidly increasing, forecasts are likely to be accurate, meaning wage earners should be better off overall by the end of the year.

More good news is that the central bank, Norges Bank, is still expected to cut interest rates this year.

"We could fear that we had reached a situation where they would have to consider raising the interest rate this year. I don't think that will happen now. This is long-awaited and good news for everyone with a mortgage," Kyrre M. Knudsen, chief economist at Sparebank 1 SR-Bank, told the Norwegian newswire NTB.

Norges Bank had been using interest rates to try to curb inflation. As a result, the key policy rate rose from the historic low of 0 percent to 4.5 percent in just a few short years.

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Interest rate cuts as a result of lower inflation should, therefore, free up some disposable income for households.

However, other economists have pointed out that inflation hasn't slowed as much as forecast. This means the first interest rate will not arrive until December rather than September.

"If you see this (the inflation figures) in combination with the fact that the krone exchange rate has been weak and still is, then I believe that it points to the fact that the interest rate cut will be delayed, and we believe that it will come in December," Kjersti Haugland, chief economist at DNB, told broadcaster TV 2.

The bad news for consumers then is that they may have to endure higher interest rates for longer, even if cuts should arrive in 2024.

More mixed news comes in the form of what has led to slower inflation. Statistics Norway said that car prices contributed to the slowdown in price increases.

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"Car prices fell by 2.1 percent from April to May. It is the biggest monthly price drop we have seen for cars since the 90s," Espen Kristiansen from Statistics Norway said.

The bad news here is that cars aren't really an everyday purchase, so the effect of less rapid inflation due to car prices is unlikely to be felt by many.

By comparison, food prices are 5.4 percent higher than they were a year ago, which is much more likely to dent consumers' budgets than shelling out for a new car.

Still, Statistics Norway said that food prices weren't rising as quickly as they were at the same stage last year.

Falling energy prices, down around 15.7 percent over the last month, are also a large contributor to less rapid inflation. Consumers in Norway will notice this in their energy bills, which will also naturally get cheaper as they consume less electricity in the warmer months of the year.

A final silver lining can also be found in a small fall in core inflation, which excludes the effects of taxes and energy prices. Core inflation has slowed every month since November and was 0.3 percentage points lower in May than in April.

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