2011.11.10 04:44 AM
Eco Analysis - Norway CPI: Up by 1.4% in October (A. Annenkov)
Headline CPI in Norway rose by 1.4% yoy in October, down from 1.6% in September, in line with market expectations. Core inflation remained unchanged at 1.2% yoy, also in line with expectations. Prices of air fares, electricity and food & non-alcoholic beverages were the main contributors to the deceleration in inflation, while clothing & footwear and alcoholic beverages & tobacco contributed positively. Electricity prices fell less than expected and could imply a downside risk in the coming months.
Headline inflation in Norway is expected to remain muted over the coming year, providing good grounds for Norges Bank to hold rates unchanged. While we expect growth to have been robust in Q3, a slowdown is expected over the winter. However, with oil prices remaining high, income growth is expected to remain high and fuel the domestic economy, in particular investment in the oil and construction sectors. If households also start consuming (instead of increasing savings as now), it is possible that wage and inflation pressures may return faster than currently expected.
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