Norway Q2 GDP beats expectation in the second quarter, easing pressure on the central bank to lower interest rates again. Data released by Statistics Norway earlier on Wednesday showed that Norway’s mainland gross domestic product, which excludes oil, gas and shipping, expanded 0.4 percent in the three-month period through June, beating estimates at 0.3 percent.
Overall GDP was unchanged from the first to second quarter, where a decline in oil and gas exports of 1.8 percent pulled down relative to the mainland growth. Overall GDP growth fell to 0 percent from 1 percent in the first quarter. Economists had expected the country to eke out a 0.1 percent increase in output.
Contribution from electricity production was negative in the second quarter and adjusted for electricity production, Mainland GDP rose by around 0.5 percent. Marked decline in imports in Q2 was seen as a major contribution, while net exports added as much as 0.5 percentage points.
Norges bank has been struggling with the prospect of stagflation and stagnant growth. Norges Bank cut interest rates in March and the country’s faltering economy has prompted it to signal further cuts, but a reduction from its record low of 0.5 per cent risks adding to worries about spiraling inflation. Prices have repeatedly grown ahead of expectations in recent months. In July the annual inflation rate hit 4.4 percent, well above its target of 2.5 percent.
"The overall picture is better than feared and downside risks are reduced. It indicates that Norges Bank put further cuts on hold, especially since inflation and house prices are high. We expect Norges Bank keeps interest rates steady now in September, and that prospects for further improvement in the economy mean that interest rates will be kept at current levels long." said DNB Markets in a report.
