Norges Bank’s regional network survey suggests strong growth in Norway’s production and employment

The Norges Bank’s first quarter regional network survey indicates towards a solid growth in production and employment. Unchanged indicator for labor market tightness dampens the solid impression.

The main indicator, which is the current situation, came in at 1.43. This indicates a quarterly growth of 0.7 percent quarter-on-quarter,which is close to Norges Bank’s forecast at 0.7 percent. The forward looking indicator is 1.46 which indicates growth slightly above 0.7 percent. That is at a solid side Norges Bank forecast. Its 2019 suggests that growth decelerates to 0.5 to 0.6 percent quarter-on-quarter in the quarters ahead.

Growth is general solid in all parts of the economy except the retail sector. Given the retail sales, the sector struggles at the moment. Growth in services delivering to household is solid. This is entirely consistent with the national accounts. The softness in consumption is in consumption of goods.

Employment is expected to grow 0.43 percent in the first quarter and 0.46 percent in the quarters ahead, according to the survey. This suggests that the overall employment growth in 2019 will come in between 1.5 percent and 1.75 percent. Norges Bank expects 1.1 percent. The indicator for investment growth was also on the solid side, increasing from the last survey.

The companies expect wage growth at 2.99 percent in 2019, up from 2.94 percent in the last survey. That is slightly on the downside to Norges Banks forecast at 3.2 percent.

“The only weakness we can see in the survey was that the indicator for labour market tightness was about unchanged. It is still weak given other labour market figures. The indicator for capacity constraints on the other hand increased”, said Nordea Bank in a research report.

The survey released today indicates towards continued solid growth in production and employment. The forward looking indicator for growth is on the upside and both the current and forward looking indicator for employment on the solid side.

“This will to some degree be counteracted by the still rather weak indicator for labour market tightness. In sum this survey is an argument for Norges Bank to forecast continued gradually higher rates in Norway in the coming interest rate path”, added Nordea Bank.