Norwegian economic growth recovered in the second quarter as expected following the temporary weak first quarter. This underpins Norges Bank’s view for a September hike. The mainland GDP grew 0.7 percent, close to consensus expectations.
The first quarter economic growth was upwardly revised to 0.5 percent from 0.3 percent on a quarter-on-quarter basis. Taking into account that first quarter was upwardly revised – together with the strong growth in the second quarter – the overall growth in the first half of this year has been in line with central bank’s expectations.
As expected, the upturn in mainland economy was widespread. Manufacturing grew strongly by 1.6 percent, while the only deceleration was in the retail sector which has been struggling lately. The demand picture was slightly mixed, but for Norges Bank the most significant thing is that private consumption rose at a rather healthy rate with 0.4 percent, noted Nordea Bank. Nevertheless, the central bank possibly knew that consumption growth would be slightly on the soft side when they made the June report.
Employment rose 0.4 percent quarter-on-quarter, which is consistent with Norges Bank. This suggests a growth in employment well above population growth, meaning that there would be further pressure in the labor market.
“We think Norges Bank will view today`s report as very much in line with its expectations. Hence, no need to deviate from the rate path which suggests a September hike”, added Nordea Bank.
