Norges Bank’s Q2 regional network report indicates continued strong growth

The Norwegian central bank published its second quarter regional network report today. The main indicator, which is current situation, came in at 1.23 that shows a quarterly growth at 0.6 percent on a sequential basis, slightly on the subdued side compared to Norges Bank at 0.7 percent. Meanwhile, the forward looking indicator is 1.47 which indicates growth at 0.7 percent. Norges Bank’s projection suggests growth of 0.6 percent in the third quarter and fourth quarter, noted Nordea Bank.

Both the retail sector and construction was softer in the second quarter. Late spring is cited as slowing down both sectors. Both sectors expect a rebound in the third quarter which explain the stronger forward looking indicator. This indicates that Norges Bank would give little weight to a slightly weaker in the second quarter, stated Nordea Bank.

The employment indicator was solid at 0.5 percent sequentially for the current quarter and 0.5 percent for the forward looking indicator. It affirms the picture from the first quarter official employment figures; employment is growing faster than central bank has anticipated.

The indicator for employment tightness has been slightly on the weak side lately, but picked up in the second quarter. Along with a continued rise in the indicator for capacity utilization, this points to an increasing output gap in line with Norges Bank’s view.

“Today’s survey points to growth in production in line with Norges Bank, but faster growth in employment. Strong growth in production and employment and increasing signs of higher capacity utilization make us more certain that Norges Bank will hike in September despite the weak inflation figure”, added Nordea Bank.

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