On Wednesday 20 May we will receive mainland GDP figures for Q1, analysts expect the growth at 0.2% q/q below Norges Bank's forecast at 0.35% q/q.
After an average growth of about 0.5% q/q for some years, the first clear signal is expected of an oil related slowdown with mainland growth slowing significantly. We have already received production figures that show a decline in manufacturing production after years of solid growth.
However, the main question is how production in the big service sector will be affected by the slowdown in the oil sector. Here we have few leading indicators. We know that deliveries to the oil sector are important for part of the service sector and we forecast a rather strong slowdown in these parts of the service sector.
Rather healthy Q1 figures for consumption of goods argues however that the retail sector grew at a healthier pace in Q1. Also some other consumption related parts of the service sector probably did well.
The Q1 figure will be important for Norges Bank's outlook. Norges Bank's own business survey actually points to lower growth than forecasted by Norges Bank and if actual GDP also is on the downside, Norges Bank must revise down its view on growth and capacity utilization.
If that is right it argues not only for a rate cut in June, which then is close to a done deal, but a rate path with a probability of a further cut. A further rise in oil prices, which for some reason does not lead to a significant strengthening in NOK, is the main risk to such a scenario.
