Producer price index, 15 July 2006

The price of crude oil rose by 7.5 per cent from June to July, and reached its highest level ever recorded. Prices are affected by increasing demand on one side of the market, and uncertainty about supply from the Middle East, Nigeria and Venezuela on the other. Following a winter of meager snowfall in mountain regions, a dry summer led to increasing concern about depleted water reservoirs for production of hydroelectric power, which in turn led to an increase in electrical power of 9.4 per cent. Energy goods, representing 66.5 per cent of the weights of the total index, are thus the main force contributing to the past month's high growth in the producer price index.

Prices of metals continued along a long-term upward trend, with an increase of 7.1 per cent. The largest price growth within this category was in non-ferrous metals. Aluminum is heavily represented in this sub-index, but over the past month it was the prices of nickel, copper and lead that saw the highest growth rates.

In most manufacturing sub-indexes prices saw moderate changes, with an over all increase in the index for manufacturing of 2.4 per cent. Prices of energy and commodities are usually more volatile than those of manufactured goods.

By economic categories, the developments in petroleum and power markets are also clearly evident. Prices of energy goods rose by 7.4 per cent, while those of consumption goods and intermediate goods increased 0.8 and 2.8 per cent, respectively. The index for capital goods prices fell by 0.3 per cent.

For the domestic market, which includes goods produced and sold in Norway only, the price index increased by 2.7 per cent from June to July. The somewhat lower growth in this sub-index is due to generally lower price increases in the domestic market, and the lower weight attributed to oil prices in the domestic market index.

July 2005 to July 2006: A total rise of 13.7 per cent

Prices of petroleum, electricity and commodities have seen a steep growth over a relatively long period, which has contributed to a total growth in the producer price index of 13.7 per cent since July of last year. The crude oil price increased 16.4 per cent, and the price of electricity by more than 50 per cent, over the past twelve months. The total twelve-month index change for July is approximately the same as that of last month, which means that the over all price development from June to July was about the same in 2005 and 2006.