Per cent 25  25 Non-financial corporate sector  20  20  15  15 Households  10  10  5  5 House prices  0 1998  0 1999  2000  2001  2002  Sources: Norwegian Association of Real Estate Agents, EFF, FINN.no, ECON EF, ECON and Norges Bank SG Gausdal 31.01.03  The sharp rise in electricity prices may lead to lower growth in consumption this year. Higher electricity expenses reduce household purchasing power. Many enterprises will also be facing higher costs. On the other hand, high electricity prices generate revenues for central and local government. Electricity prices 1 January 1998 = 100 340  340  300  300 260 220  Spot prices incl. tax and grid rental  180  260 220  Electricity prices index in the CPI*  180 140  140  100  100 *Electricity (including grid rental) accounts for 3.3% of CPI  60 Jan 00  60 Jul 00  Jan 01  Jul 01  Jan 02  Jul 02  Jan 03  Sources: Statistics Norway, NordPool, Viken Energi and Norges Bank SG Gausdal 31.01.03  Higher electricity prices will result in a sharp increase in the consumer price index this winter. The year-on-year rate of increase in the consumer price index may approach 4 per cent in January and February. Underlying inflation will also be affected. For example, this can be the result of higher rents and higher costs in some business sectors.
Labour costs1) in manufacturing: Norway and trading partners Percentage change in hourly costs  8  8 7  7  Norway 6  6  5  5  Trading partners  4  4  3  3  2  2  1  1)  1  Labour costs per hour  0  0 1991 1993 1995 1997 Sources: Statistics Norway, TRCIS/IMF and Norges Bank  1999  2001  SG Gausdal 31.01.03  Since 1998, wage growth in Norway has been markedly higher than that of our trading partners. Until spring 2001, the monetary policy objective implied that, over time, wage growth had to be reduced to the level in Europe. The inflation target of 2½ per cent implies that wage growth over time can hover around 4½ per cent. This takes into account that productivity growth in Norway has been around 2 per cent over the past twenty years. If wage growth is higher than 4½ per cent, monetary policy generally has to be tight in order to counter inflation. This will normally lead to deteriorating competitiveness in the business sector. If wage growth is lower than 4½ per cent, monetary policy normally has to be eased to counter inflation that is too low. This can result in a weaker krone and an improvement in competitiveness in the business sector. The difference between current wage growth and the long-term equilibrium level of 4½ per cent can be 2 referred to as the wage gap for the Norwegian economy.