An uneasy world made its mark on PPI
March saw the largest monthly decrease in producer price index (PPI) in over 15 years. Uncertainties relating to the corona pandemic and the petroleum markets are the main causes of this downturn.
In total, PPI fell by 7.5 percent from February to March 2020. If one takes out the energy goods, we see a slight uptick in PPI of 0.4 percent. The downturn in prices on energy goods was large, at 18.7 percent. The largest contributors here have been natural gas and above all, crude oil. These two combined had a price drop of 22.7 percent, measured in NOK. Concerning the crude oil, the month started with Brent Blend going for about 50 dollar per barrel, whereas this price had halved by month’s end. The price war between OPEC and Russia combined with markets unease with the ongoing pandemic has been the largest contributors to this price trajectory. This avalanche in prices in Norway’s biggest export industry was in PPI dampened somewhat by a record weak Norwegian krone.
Figure 1. Price index. 2015=100
|PPI total||PPI excluding energy goods||Energy goods|
Petroleum also gave downturn in manufacturing
In the manufacturing industry too, petroleum contributed to falling prices. The prices on refined petroleum products fell by as much as 13.9 percent from February to March. This happened after several months with increasing prices and can be put in relation to the fact that natural gas and crude oil has had a downward trend even before the heavy fall in oil prices in March.
Some manufacturing industries experienced an upturn in prices. Among these, one can mention the metal industry and the seafood industries, with increases of 2.1 and 1.7 percent, respectively. Both industries are large export industries, and some of the price increase in these industries can be attributed to the weak Norwegian krone.
Fourth month in a row with lower electricity prices
One part of Norway’s economic picture that has to a lesser degree been affected by a world in turmoil, are the electricity prices. Even though the corona outbreak has reduced prices on gas and CO2-quotas on the European market, the corona situation alone has not reduced demand in the Nordic countries (in Norwegian). The supply of electricity has been good all of 2020, with the right magazine fillings and a stable wind power production. This have been contributary to spot prices on electricity being the lowest since the summer of 2015.
The only thing that dampened the total downturn in electricity prices, was a smaller increase in rents on distribution. The total change in prices on electricity, gas and steam ended up at a negative 5.5 percent.