Friday, 9 August 2013

Price Inflation Jumps in Norway Driven by Food Prices

Norwegian voters never get tired of subsidising their farmers it seems. The result of high import tariffs and government (read tax payer) subsidies on domestically produced food? High prices, low quality and poor selection.

Statistics Norway reports,

Monthly change: higher prices on food, fuel and furniture

From June to July, the CPI rose by 0.4 per cent. Food prices increased 2.6 per cent and were the greatest contributor to the rise in the CPI. This increase can partly be explained by price adjustments made in the wake of the “Agricultural Agreement 2013”, which gives higher “measure prices” for some agricultural goods such as milk, mutton, potatoes, corn and fruit and vegetables. In the CPI, higher prices were registered for all food sub-groups, except for fresh fruit and fresh vegetables.
Fuel prices including lubricants went up 3.0 per cent from June to July. Prices of furniture, carpets etc. rose 3.8 per cent in the same period, mainly because of higher prices in July following sales activity in May and June. Increased prices on transportation and newspapers and periodicals among others also contributed to this month’s rise in the CPI.
The increase in the CPI was mainly dampened by prices of clothing and footwear, which went down 4.4 per cent from June to July. Prices on accommodation services usually go down in this period, and this year they fell by 9.8 per cent.

Year-to-year growth: electricity prices continued to contribute the most

The CPI rose by 3.0 per cent from July 2012 to July 2013. The main contributor to the year-to-year growth was the 35.3 per cent increase in prices of electricity including grid rent. The year-to-year growth for electricity can partly be explained by the low electricity prices during summer 2012, due to a high production of hydropower. The CPI without electricity (CPI-AEL) rose 1.8 per cent in the last twelve months, meaning electricity prices including grid rent pulled the CPI up more than one percentage point in the period.
Other important contributors to the growth in the CPI were imputed rentals for home owners, which rose by 3.1 per cent from July last year, and the prices of maintenance and repair of personal transportation equipment, which went up by 3.6 per cent in the same period. Alcoholic beverages and tobacco showed a joint price increase of 4.5 per cent. The price for restaurant services went up by 3.2 per cent in the same period.
Airfares fell 15.6 per cent in the last twelve months and were the main contributor to dampening the increase in the CPI. Both domestic and international flights showed similar decreases. Clothing prices fell by 2.0 per cent and prices on telephone services fell 2.6 per cent from July 2012 to July 2013.

Change in the year-to-year growth: marked rise in price growth

The year-to-year growth in the CPI rose from 2.1 per cent in June to 3.0 per cent in July. The main contributors were the development in electricity and food prices. Electricity including grid rent rose almost 12 per cent from June to July last year, while there was almost no decrease in the same period this year. Food prices rose by 2.6 per cent from June to July this year, while rising less than 1 per cent in the same period last year.
The index was pulled in the opposite direction by airfares, which showed a weaker increase in prices from June to July 2013 than for the same period last year.
The year-to year growth in the CPI adjusted for tax changes and excluding energy products (CPI-ATE) was 1.8 per cent in July; up 0.4 percentage points from the previous month.

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