The rate of price increases for services has diminished in recent years and currently stands at roughly 2 per cent. So this does not appear at first sight to be a contributory factor to the low CPI inflation. It is important to remember, though, that productivity growth in the services sector is normally assumed to be somewhat lower than in the goods sector. Given an inflation target of 2 per cent, therefore, services prices should, on average, be increasing slightly more than 2 per cent and goods prices by somewhat less. With the exception of short periods this has also been the case since 1995, as services prices have risen on average by 2.5 per cent and goods prices by 0.6 per cent. So, developments in services prices have also contributed, at least in the most recent period, to the low inflation. The chief remaining explanation for the low CPI inflation appears, however, to be found in the developments in goods prices. Falling goods prices contributing to the low inflation When it comes to goods prices it is natural to distinguish between price developments for domestically produced goods and goods that are imported from other countries. Prices of imported consumer goods have dropped since the middle of 2003. But inflation for domestically produced goods has also been low, with prices even falling during the second half of last year (Chart 3). Consumer prices for both domestically produced and imported goods depend on many factors, e.g.
oil, energy and mortgage interest)  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  Goods  Services  -3  -3  -4  -4  jan-95 Jan 95  jan-96 jan-00 jan-01 jan-02 jan-05 Jan 96 jan-97 Jan 97 jan-98 Jan 98 jan-99 Jan 99 Jan 00 Jan 01 Jan jan-03 02 Janjan-04 03 Jan 04 Jan 05  Note. 12-month changes in per cent. Inflation measures computed according to Statistics Sweden’s new method. Source: The Riksbank  3. Consumer goods 6  6  4  4  2  2  0  0  -2  -2 Importerade varor Imported goods  Inhemska varor Domestic goods  -4  -4  jan-95 jan-96 Jan 95 Jan 96  jan-97 Jan 97  jan-98 jan-03 Jan 98 jan-99 Jan 99 jan-00 Jan 00jan-01 Jan 01jan-02 Jan 02 Jan jan-04 03 Janjan-05 04 Jan 05  Note. 12-month changes in per cent. Inflation measures computed according to Statistics Sweden’s new method. Source: The Riksbank  8  BIS Review 25/2005  4.