This autumn’s power bonanza leads to the highest inflation since October 2008: Prices in Norway rose by 5.1 per cent in November
On Friday morning, Statistics Norway (SSB) will present the latest inflation figures for November. They show that inflation rose 5.1 per cent last month.
This is the highest annual growth since October 2008. Over the past 30 years, inflation has only been higher at times: October and November in 2008.
The sharp rise in prices also surprised economists, who had previously assumed that it would “only” rise by 4.5 per cent. In October, inflation was 3.5 per cent.
Never measured such a high difference before
Statistics Norway leaves no doubt: It is the crazy electricity prices that are behind much of the price increase.
A cocktail of little water in Norwegian reservoirs, high gas prices, high CO2 prices, low winds on the European continent and to the last low temperatures, has sent electricity prices to record high levels in both Norway and Europe in recent months.
Statistics Norway now uses target figures that rarely receive much attention, it is called the CPI-JEL (inflation without electricity), and refers to this increase of 1.8 per cent from November last year to November this year.
This means that the prices of electricity, including grid rent alone, contributed to raising the CPI by 3.3 percentage points during the period. We have not measured a corresponding difference between the CPI and the CPI-JEL before, says senior consultant Trym Kristian Økland at Statistics Norway.
– If we disregard electricity prices’ significant contribution to the growth in the CPI in November, we registered a rise in fuel prices, as well as hotel and restaurant services, he says.
The increase was dampened by price developments for food and non-alcoholic beverages. Here, a price decline of 3.5 percent was measured, according to Statistics Norway.
– Eats a lot of purchasing power
Like most chief economists, Marius Gonsholt Hov at Handelsbanken is most concerned with the underlying inflation, which has been adjusted for electricity prices and tax changes. It ended at 1.3 percent in November, an amount of 1.2 percent.
In the latest forecast from Norges Bank in the Monetary Policy Report, the central bank expected core inflation of 1.1 per cent in November.
But Gonsholt Hov also sees that the electricity shock and total inflation can create uncertainty for Norges Bank.
– At the moment, this eats a lot of purchasing power. When you look at the year as a whole, there is not a strong reduction in purchasing power, but here and now there is a very strong reduction, he says.
He thinks electricity prices will give Norges Bank less headaches when Prime Minister Jonas Gahr Støre now has promised power assistance to the Norwegian population. Then only uncertainty remains about the omicron variant of the coronavirus, according to Gonsholt Hov. However, he does not think it will be enough to stop Norges Bank’s razor.
– We lean towards them raising interest rates next week, he says.
Inflation is a term for the development in the general price level of goods and services in society in a given period. The unit of measurement is the consumer price index, which is an important variable in Norges Bank’s determination of the key policy rate. Norges Bank manages monetary policy according to a target that inflation should be at a percentage point over time.
I think it will affect the wage settlement
– The most startling thing is the rise in total inflation, says chief economist Kjersti Haugland in DNB Markets.
She believes that the price increase, which she also expects to continue, will be an important basis for wage negotiations in the spring.
– What happens to total inflation will be an important backdrop for wage negotiations next year and the higher it is, the more one can expect that there will be demands for significant wage orders to compensate for it. And the more wage increases, the more basis we have for a long-term rise in core inflation, says Haugland, who adds that this in turn will indicate a higher tenant.
– Those who are concerned about the rent development should be concerned about what happens to the wage settlement in the spring and the price development this winter, she says.
Inflation in the United States
In the international markets, however, there are far more important figures that investors are watching on Friday. At 14:30, the US inflation figures will be presented. Inflation in the United States has been under scrutiny lately. Higher inflation will in fact suggest that rents should be raised, which in turn will normally be negative for the stock market in isolation.
This is because it will be more attractive to be invested in the rental market. This can lead to some investors moving parts of their capital from shares to rent. When the current rent level and long-term interest rates increase, it will at the same time weaken corporate earnings. This affects companies that do not make money today, but have their earnings far in the future.
According to Gonsholt Hov, inflation in the US is expected to pick up at 6.8 per cent in November.
– Then we are at the highest level we have seen since 1982, says Gonsholt Hov.
However, he replied that the market has already priced in a steeper rent increase than the central bank has previously assumed.
– They are very important, says Haugland in DNB Markets about today’s inflation figures from the USA.
She says that the price increase in the US is expected to increase, but that the market may have become a little immune to new surprises after the first inflation shocks have subsided. Men:
– If we get a strong upside surprise, it will probably put a shock in the market players, she says.(Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other use of all or part of the content may only take place with written permission or as permitted by law. For further terms see her.