As expected, growth in the Norwegian economy slowed further in Q2 15, and the short-term outlook is even weaker. The decline in oil investment is now hitting oil-related industries hard, and we are beginning to see signs of second-round effects in parts of the service sector.
On the other hand, lower interest rates are helping to keep both private consumption and the housing market moving, the weaker krone is boosting the export industry, and public infrastructure investment is rising rapidly thanks to a continuing expansionary fiscal policy for 2016. Core inflation was 3.1% in August, which is above the inflation target of 2.5%. However, the high reading is mainly due to a weak NOK during 2015 and is seen as temporary.
Furthermore, wage generated inflation seems to be on the decline. Wage growth next year is expected to be below 3.0%. i.e. real wage growth is set to be meagre going forward.
