The inflation measure CPI-ATE excludes the effects of changes in taxes and energy prices. Norges Bank has given weight to this indicator of underlying inflationary pressures in the economy, but also keeps an eye on other indicators. The 12-month rise in the CPIATE adjusted for the effects of lower maximum day-care rates is estimated at 1.1 per cent in March. However, the CPI-ATE not only strips out temporary effects of changes in tax changes and fluctuations in energy prices, but also trend changes in these variables. Thus, this indicator is not a full-proof measure of underlying inflation. In the last 10-20 years, where energy prices have risen at a faster pace than other consumer prices and the tax level has increased somewhat, the CPI-ATE has tended to underestimate underlying inflation. This is illustrated in the chart, which shows the difference between the year-on-year rise in the CPI and the CPI-ATE over a moving 10-year average. Since 1997, the difference has been about 0.35 percentage point. Even when taking into account trend increases in energy prices, inflation is still moderate. The indicators that provide the best expression of underlying inflationary pressures in the economy may vary over time. Driving forces ahead Monetary policy influences the economy with long and variable lags. This means we must look ahead when setting interest rates. I would therefore like to comment briefly on some international developments that are important to the Norwegian economy and the assumptions concerning developments in Norway on which Norges Bank’s assessments are based.

The exception is the primary industries, which play a far more important role in these two counties than in the rest of the country. The share employed in the public sector is also somewhat higher than in Norway as a whole. Developments in North and South Trøndelag counties are largely consistent with the overall picture for Norway. Suppliers to the petroleum industry and business sector services report particularly strong growth. The interviews reflect optimism with respect to the next half year with confidence in continued growth. The service sector and suppliers to the petroleum industry are also expecting the strongest growth ahead. With the exception of retail trade, all industries appear to be increasing investment. Construction of day-care centres is pushing up investment in the local government sector. Investment is still high in the service sector, but high investment over the past year is pushing down growth ahead. In general, profitability developments are favourable. The retail industry reports unchanged profitability, while the building and construction industry has reported an improvement in profitability. Profitability growth in the export and service industries appears to be solid. Employment is rising in the region and unemployment is at its lowest level for five years. For manufacturing and retail, the rate of employment seems to be constant, while the construction and service sectors are showing a clear rise. There are clear indications of growth in employment in the local government sector. Skills shortages are increasingly being perceived as a constraint on production growth.