Inflation moved up primarily as a result of a slower decline in prices for imported consumer goods, but the depreciation of the krone since the beginning of 2003 has also contributed. In addition, the rise in prices for domestically produced goods and services stabilised, and towards the end of 2004 there was a tendency towards a higher rise in prices for these goods and services. At the beginning of 2005, inflation measured by the CPI-ATE was lower than expected. Prices for imported consumer goods fell more than expected. It is uncertain whether this price decline was due to abnormal seasonal patterns or a fall in underlying inflation. The fall in prices may be related to an unusually warm winter, which has made it more difficult to sell winter clothing and sports equipment at ordinary prices. On the other hand, there are indications that prices for imported consumer goods in foreign currency may have fallen somewhat more than previously assumed. The wide variations in prices for some imported consumer goods, especially clothing and footwear, may entail wide monthly variations in consumer price figures. Excluding changes in prices for clothing and footwear, the year-on-year rise in the CPI-ATE was 1.3 per cent in February, up from 1.1 per cent in January. Changes in indirect taxes and particularly in VAT rates make it difficult to interpret the most recent price figures. The low level of inflation at the beginning of the year may be due to a lag in price adjustment following the indirect tax changes.
However, we assume that households will spread consumption over time so that the savings ratio will continue to fall in spite of an increase in interest rates. Growth in housing investment is expected to ease through 2005. However, the projection for housing starts is also very high for 2005. Such a high level of housing starts over several years probably means that more dwellings will be constructed than implied by underlying demand. As a result, housing investment is expected to decline after a period. Higher interest rates and weaker developments in the Norwegian economy may also lead to a fall in residential construction after a period. The upturn in mainland fixed investment is broadly based. Stronger profitability, higher capacity utilisation and solid export growth will contribute to continued investment growth in goods-producing industries. Demand for services is expected to continue to grow for a period ahead with an attendant  BIS Review 18/2005  5  increase in investment in service sectors. When growth in the economy gradually slows down, investment growth will probably slacken. Mainland exports of good and services from mainland Norway will also benefit from solid global growth this year. Later in the period, a continued loss of market shares as a result of high cost levels will dampen export growth. Unemployment is expected to decline this year and next. In subsequent years, growth in demand and output is expected to ease, and unemployment may edge up again when capacity utilisation approaches a more normal level.