Norway’s retail sales grow above expectations in October

Norway’s retail sales improved in October and came in above consensus expectations. Seasonally adjusted, retail sales grew 0.9 percent sequentially in October, as compared with consensus projections of 0.4 percent growth. Meanwhile, commodity consumption index came in at 0.6 percent.

Consumption of other goods, such as shoes, clothing, home appliances and sporting goods, rose 1.6 percent in the month. This assisted household consumption to rise by 0.7 percentage points. The level of this consumer group is back to the level of June, noted DNB in a research report.

However, consumption of beverages and food dropped 0.5 percent sequentially, whereas the purchase and operation of vehicles fell 0.7 percent. Together, these two consumer groups pulled household consumption down by over 0.3 percentage points.

The commodity consumption index, which is the major input to the calculation of household consumption in the national accounts, dropped 0.3 percent in the last three months as compared with the prior three months. If the October level remains unchanged in November and December, the quarterly growth in the fourth quarter would be 0.2 percent, stated DNB.

Both indices of retail sales and households commodity consumption might fluctuate significantly. The underlying trend in both indices is subdued. This is seen in weak figures in the national accounts for commodity consumption in recent quarters. The Norwegian central bank, Norges Bank expects consumption to grow 1.9 percent in 2016. This seems to too high, according to DNB.

“With a growth in household consumption of 0.2 percent in the fourth quarter and a rebound in spending on services can provide an overall consumption growth this year at below 1½ percent”, added DNB.

The Norwegian central bank has possibly seen this when working with the December report, while today’s prints do not alter the view on the economy much. Recent developments have indicated towards more subdued growth in activity than anticipated by Norges Bank. This, in turn, will contribute to the direction of lower interest rates. However, the NOK continues to be weak, while the house price growth stays high.

“We still believe Norges Bank will assess that the policy rate should be kept unchanged going forward”, said DNB.