Norway: Inflation falls to near three-year low in May
Inflation decelerated to 3.0% in May, down from April’s 3.6%. May’s result marked the weakest inflation rate since June 2021 and undershot market projections. Looking at the details of the release, the result was largely due to a softer rise in prices for housing and utilities. Moreover, price pressures for food plus clothing and footwear also eased.
Accordingly, the trend pointed down, with annual average inflation falling to 4.4% in May (April: 4.7%). Meanwhile, core inflation cooled to 4.1% in May, from the previous month’s 4.4%. The print surprised markets to the upside, but marginally undershot—for a fourth consecutive month—Norges Bank’s expectations of 4.2%
Lastly, consumer prices dropped 0.15% from the previous month in May, contrasting the 0.83% increase seen in April. May’s result marked the weakest reading since August 2023.
Our Consensus is for inflation to pick up from current levels in June and further in Q3, and then to wane in Q4. Wage growth is expected to outpace inflation this year, supporting a recovery in purchasing power. That said, a higher unemployment rate and the lagged impact of past interest rate hikes will cap the recovery in private consumption, likely keeping a lid on price growth.
Average inflation should continue to decline throughout 2025–2028, while remaining above Norges Bank’s 2.0% target until 2028.