Norwegian consumer price index rises marginally in April, core inflation likely to rise on weakening of NOK

Norwegian consumer price index rose 0.8 percent on a year-on-year basis in April, a slight rise from March’s 0.7 percent. Consensus expectations were for the inflation to come in at 0.4 percent, while the Norges Bank had expected 0.5 percent. The headline inflation was dragged by declining electricity prices.

The data for April is more uncertain than usual, with more of the prices based on imputed prices rather than actual observations. Government actions taken to restrict the outbreak of corona have implications for the CPI in April. Services which have had close to no consumption in April make up around 10 percent of the overall CPI, noted DNB Markets in a research report.

The core inflation came in at 2.8 percent year-on-year in the month, accelerating from March’s 2.1 percent. Norges Bank project 2 percent year-on-year in the March MPR, but did not project the monthly figures in the May update. Consensus expectations were for the core rate to have eased 2.1 percent, while Norges Bank had expected 2 percent. Prices on imported goods rose 2.2 percent year-on-year in April, up from 0.7 percent year-on-year in March. Imported inflation in January was high as 2.9 percent. Domestic inflation rose 0.1 percentage point to 3 percent year-on-year.

“Core inflation is expected to increase due to the weakening of the NOK, and some prices may have reacted earlier than assumed. The April figures are also more uncertain the usual as more prices are imputed. We do not think Norges Bank will be worried over today’s figures and put much more weigh on the low employment”, added DNB Markets.