Norwegian inflation weaker than expected in March, likely to rebound in April

Norwegian inflation figure for the month of March came in much softer than anticipated, but it is expected to pick up again. Core inflation decelerated to 1.2 percent year-on-year from February’s 1.4 percent. Consensus and Norges Bank had expected core rate to accelerate to 1.5 percent.

Food prices dropped more than expected, pulling the core rate down by nearly 0.2 percentage points. The Easter effect on food prices were evidently stronger than projected. This argues for a stronger recovery next month. Meanwhile, restaurant services prices dropped 0.8 percent, the second weakest month on history and the weakest March ever.

Clothes and shoes prices did not recover solidly after the strong price cuts in winter sale. These prices fell 5.6 percent year-on-year while pre sales growth came in at -1.3 percent. Growth is likely to pick up next month, noted Nordea Bank in a research report. Airfares came in below expected, falling on the month in spite of Easter. Timing of the seasonal sale on books signifies that prices on books surged and pulled up 0.1 to 0.2 percentage points.

This figure was evidently softer than expectations. Some of the softness is seen as temporary. Food prices are expected to recover next month, along with prices on clothes and shoes. However, upside risk to Norges Bank’s forecast for an average growth in core at 1.5 percent in second quarter is no longer expected.

“We still believe in September hike, but the risk on the downside has increased”, added Norges Bank.

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