Norwegian mainland GDP growth decelerates in Q3 on subdued consumption growth

Norwegian mainland growth came in below expectations, owing to subdued consumption growth. However, employment came on the solid side. The mainland economic growth expanded 0.3 percent on a quarterly basis following a growth of 0.7 percent seen in the second quarter.

The growth rate for second quarter was upwardly revised from 0.5 percent. Consensus expectations were for the Norwegian economy to have expanded 0.6 percent, whereas the central bank had expected a growth of 0.7 percent. Meanwhile, employment rose strongly by 0.4 percent. Norges Bank’s projection suggests a quarterly growth at 0.3 percent, noted Nordea Bank in a research report.

The production was disturbed by some temporary factors. Agricultural production negatively contributed 0.24 percentage points because of a dry summer while electricity production added 0.10 percentage points.

Nevertheless, the demand picture stands out as soft and in particular private consumption that dropped 0.2 percent quarterly. It was pulled down by a fall in goods consumption by 1.4 percent. This resulted in a decline in retail sector’s production by 0.7 percent.

Private consumption rose 1 percent and the retail sector recorded growth of 1.7 percent. Apart from consumption, the picture of demand is slightly mixed. Oil investment is up and the fall in housing investments appear to level out.

The solid news was employment which rose 0.4 percent quarterly. On a year-on-year basis, employment rose 1.5 percent year-on-year.

“To us, it is clear indication that seeing through the volatility in the production figures there is solid growth in the economy. Strong employment growth will boost private consumption which might temporary be weak due to the current high electricity prices”, stated Nordea Bank.

Furthermore, the housing downturn is coming to an end and oil investment is rising solidly. Looking ahead, growth is expected to be strong and the labor market will tighten further.