In the course of 2005, office rental prices began to pick up in the largest Norwegian cities, with considerable variation within the various quality and location segments. The rise in consumer prices has also edged up since the beginning of the cyclical upturn. The year-onyear rise in the consumer price index (CPI) was 2.6 per cent in September. Energy products such as electricity and oil have put upward pressure on inflation over the past year. Electricity prices, including grid rent and taxes, were 48 per cent higher in August than one year earlier, while petrol prices were 1 per cent higher. Since the beginning of 2001, the rise in energy prices has been over 7 per cent on average. Variations in energy prices may also lead to wide monthly variations in consumer price inflation. As a result of high electricity prices, the rise in CPI inflation will remain steady though 2006. Energy prices are expected to fall in the spring of 2007, dampening the rise in CPI inflation. The rise in prices for non-energy goods has been moderate in recent years. Price impulses from imported consumer goods have been particularly weak. Their contribution to inflation has been negative virtually every year since the mid-1990s, partly reflecting increased trade, a shift in imports towards low-cost countries and a substantial improvement in distribution efficiency in Norway. Price impulses from imported consumer goods are expected to continue to exert downward pressure on inflation for some time ahead, albeit to a lesser extent than in previous years.

Just why should the Riksbank be at all concerned with the debate about the new economy and the conditions for long-term growth? Monetary policy’s concern surely lies in influencing the development of aggregate demand in order to keep inflation in check. The reason is that fluctuations in the rate of inflation stem mainly from demand’s deviations from the trend rate of growth. The Riksbank therefore has to form an opinion about the economy’s potential growth rate. We also need to know how the growth trend changes over time. A dilemma here, however, is that the growth path cannot be observed directly. The fundamental factors behind an economy’s trend rate of growth include population changes, the capital stock, technology and the efficiency of resource utilisation. In the United States, recent innovations in telecommunications and computerisation have contributed to higher gains in productivity. The far-reaching effects that the new information technology is having on production and distribution processes have improved the conditions for growth. A period of high investment growth is needed if information technology is to generate tangible effects. The new investment transforms the capital stock; new technology replaces outmoded practices and the labour required for each unit of capital equipment decreases. Unprofitable units or firms are closed and new facilities are established. Productivity rises in the economy as a whole. High productivity growth makes it possible to maintain business profits and keep price increases down. The transformation process generates a positive spiral; the introduction of the new technology results in widespread rationalisation and greater efficiency.