• Norwegian inflation misses forecasts in November despite the weak NOK
  • Price pressure on producers mounts as PPI accelerates the most since April
  • Norwegian krone declines across the board just three days ahead of the Norges Bank meeting

The Scandinavian currencies have had tough time of late as both NOK and SEK have plunged due to real estate concerns. While inflation still hovers close to the Riksbank’s target, this is not the case when it comes to the Norwegian economy and therefore SEK could outperform its peer in the nearest future. Today we got another sign of such a trend as a set of inflation data from Norway missed forecasts sending the NOK vastly lower.

link do file download linkNorwegian inflation remains a long way off from the Norges Bank’s objective. Source: Macrobond, XTB Research

According to the country’s stats office prices rose 1.1% yoy in the past month falling short of the median estimate placed at 1.2% yoy. In addition, a core gauge produced mediocre 1% yoy while economists surveyed by Bloomberg had envisaged as much as 1.2% yoy. In both cases (CPI and core CPI) there were declines by 0.1 percentage point compared to the prior month’s values. Let’s add that the inflation target is set at 2.5% illustrating how much the Norwegian central bank has to do in order to fulfil its mandate. It’s also worth mentioning the latest underperformance of the NOK which has slid against the single currency (EURNOK has moved up from 9.30 to 9.90) since October and it could have exerted upward pressure on prices. Having said that one cannot forget about an adverse base effect as Norwegian inflation was hovering close to 4% a year ago on the back of a surge seen in oil prices.

link do file download linkReal wage growth in the critical sectors holds onto its downward slope. Source: Macrobond, XTB Research

On the flip side the higher pace of price growth could not be so easy task to achieve for the central bank as real wages in the key sectors are far from ideal suggesting no price pressure ahead. Finally producers’ profits continued to be squeezed as PPI grew as much as 9.7% yoy in the same period of time climbing to the highest since April. Under those circumstances higher wage growth is unlikely to occur, however GDP growth remains in an uptrend which could act in favour of higher wages. As we already mentioned today, this week will be dominated by central banks’ meetings and a meeting of Norges Bank is among them. The Norwegian bank meets on Thursday and references to an exchange-rate, the domestic housing market tensions and inflation could find themselves in the spotlight.

link do file download linkThe EURNOK jumped immediately after the release nearing its key resistance just a notch below 9.90. Notice that this level is almost the highest since an abrupt surge which occurred precisely three years ago whereas RSI stays constantly nearby its highest level from recent years heralding that a move to the downside could take place any time soon. Source: xStation5