PPI continues to rise
The producer price index (PPI) went up by 2.9 per cent from November to December. This was the fifth month in a row with an increase and stems from rising prices on crude oil and natural gas during the period. The PPI is now at its highest level since the drop in the oil price during the fall of 2014.
The prices of crude oil and natural gas collectively rose for the fifth month in a row and were thus the main reason for why the PPI did the same. The price of crude oil has for the most part been trending upward since the summer. The upward trend is composed of many things, but an improvement in global demand might be an important factor. On the OPEC-meeting in late November it was reported that through 2017 the demand for oil had exceeded OPEC’s initial projections. Still, it was decided to extend the cuts in the oil production among member countries. For Norway, a decreasing exchange rate on its currency, the Norwegian Krone (NOK), has further strengthened the increase in the oil price when measured in NOK.
The PPI total has not been on a higher level since September 2014, when the oil price started to drop. During the last twelve months, from December 2016 to December 2017, the PPI rose as well. The prices of crude oil and natural gas went up by about 13 per cent in that stretch and were thus the main contributor for the rise. In addition, several important manufacturing industries went up during that time:
• Refined petroleum products: 30.4 per cent.
• Basic metals: 19.5 per cent.
• Basic chemicals: 10.5 per cent.
Figure 1. Price indices. 2012=100
|Extraction of oil and natural gas||PPI total|
Increase in the manufacturing industry
The prices within the manufacturing industry as a whole went up by 1.6 per cent from November to December and it was the fourth month in a row with an increase. The rise during that period was mainly driven by higher prices on refined petroleum products which again is a result of the rising oil price. If refined petroleum products are excluded, the increase was moderate.
The price index for the manufacturing industry as a whole has never been higher, also when refined petroleum products are excluded. It has mainly been the export side of the manufacturing industry that has pulled up the index. Higher prices on basic metals, which are important export commodities for Norway, have contributed significantly. Also, the export prices have been lifted additionally by a decreasing NOK against many important currencies during the last couple of months.
Figure 2. Price indices. 2014=100
|Manufacturing total||Manufacturing excluding refined petroleum|