Norwegian inflation likely to have accelerated slightly in December, says Nordea Bank

Norway’s inflation is expected to have accelerated slightly in December; however, it is still on a downward trend. Inflation likely to be slightly on the downside to Norges Bank’s projection; however, not enough to have any effect on Norges Bank’s view, said Nordea Bank in a research report.

“We forecast core inflation at 2.8 percent y/y up from 2.6 percent last month. Consensus is also 2.8 percent while Norges Bank’s forecast is 2.9 percent”, added Nordea Bank.

It is mostly about food prices, as has been the case most of this year. Last year, an intense pre-Christmas price war mainly drove prices down by 3 percent month-on-month in December. Reports show a decline more consistent with the seasonal pattern in December 2016.

There are other issues than food prices in December, such as rents. Low interest rates and the state of the housing markets are likely to have pressed down rents. However, due to the sharp increase in energy prices, headline inflation was 3.5 percent in November and the December projection is actually 3.9 percent, stated Nordea Bank.

Norwegian inflation is on a downward path. The impact of the past NOK weakening is expected to wane. Moreover, wage growth between 2.5 percent and 3 percent suggests lower unit labor cost than is consistent with the inflation target of 2.5 percent, added Nordea Bank.