Prices for domestically produced goods and services rose by 2.1 per cent in the twelve months to July this year. Higher capacity utilisation is providing the basis for higher margins in some industries. Service prices, which showed little rise last year, have increased again this year. In many industries, including the airline industry, where price competition is strong, low profitability has led to an increase in prices. High oil prices have also resulted in price increases, for example in the transport industry. On the basis of the pay increases agreed upon in this year’s wage settlement, combined with the estimates for wage drift and wage carry-over, annual wage growth is projected at around 3½ per cent this year. Lower-than-projected wage growth may be related to the fact that there were few signs of improvement in labour market conditions prior to this year’s wage settlement. Lower-than-projected consumer price inflation last year may also have contributed to restraining wage demands this year. Low wage growth will contribute to dampening the rise in prices for domestically produced goods and services. Information from Norges Bank’s regional network is important for Norges Bank’s analysis of the Norwegian economy. Information about the state of the Norwegian economy is available earlier than information provided by official statistics, and it is informative to have closer contact with the labour market and business and industry. The situation in Region North, as in the rest of the country, is favourable. In the May round of interviews, all sectors in the region reported continued growth.
Higher demand can thereby be met by non-OPEC oil producers operating at full capacity while OPEC passively satisfies any remaining demand by increasing its production capacity. Alternatively, OPEC can take a more active position and push up oil prices even further by restraining production. Not many years ago, it was normal to assume that the long-term price of oil was around USD 20 to USD 25 (in real value) per barrel. Analyses such as the one presented by the IMF suggest that the long-term oil price level may be considerably higher than this. 1  An average of USD 45 per barrel in 2005 and falling to USD 34 per barrel in 2010 and the years following. As a result of persistently high oil prices and expectations that oil prices will remain high, investment in the petroleum sector may reach record levels this year. The investment intentions survey for the petroleum sector points to very high growth. The level is expected to remain high throughout the projection period. Activity in the petroleum sector will have spillover effects on the mainland economy, initially on the shipbuilding industry and the building and construction sector. The scale of petroleum investment and its spillover effects are highly uncertain. The last time petroleum investment showed a sharp increase, in 1997/1998, growth was substantially stronger than had been assumed. At the same time, the rest of the Norwegian economy was experiencing an upturn. The unexpected increase in petroleum investment contributed to an economic upturn that was substantially stronger than projected.