Norges Bank’s Q2 regional network report indicates stronger growth, tighter labor market

Norges Bank published its second quarter regional network report. The main indicator, which is the current situation, was 1.51. This implies a quarterly growth of 0.75 percent quarter-on-quarter, which is close to the central bank’s forecast. The forward-looking indicator came in on the solid side to the central bank’s forecast at 1.57. Growth is usually solid in all parts of the economy and even in the retail sector growth has picked up.

The indicator for labor market tightness rose solidly. It has been soft given other labor market figures, but now also indicates towards considerable tightening. The indicator for capacity constraints also rose. No doubt the output gap increases and, if anything, more than expected, stated Nordea Bank in a research report.

“Employment will grow by 0.5 percent both this and next quarter. That is on the upside to Norges Bank’s forecast. We are heading for growth in employment at say 1,9 percent this year compared to Norges Bank’s forecast at 1.6 percent”, stated Nordea Bank.

Norges Bank is expected to hike rate in June and the domestic argument for a lift in the rate path is solid.

“The big question is how much weight Norges Bank will give to the international uncertainty. In March, the central bank gave less weight to the international uncertainty and more weight to domestic news than we had expected”, added Nordea Bank.