Norwegian mainland economic growth expands in Q1, solid growth to boost investment in firms

Norwegian mainland economic growth came in line with the Norges Bank’s projections in the first quarter. The mainland GDP expanded 0.6 percent sequentially after recording a rise of 0.7 percent in the prior quarter. Consensus expectations were for the economy to expand 0.5 percent, whereas Norges Bank had projected 0.7 percent rise. On a year-on-year basis, growth expanded 2.6 percent.

As anticipated, production in manufacturing, construction and the retail sector came in subdued, but at least in manufacturing not as weak as expected. Moreover, production in the service sector was quite solid and stronger than expected.

The demand picture on the other hand came on the weak side, and it was a rather strong growth impulse from stock building that pulled up mainland GDP. Consumption remained unchanged with services up, but goods down. Housing investment dropped in the quarter.

Investment among the mainland companies dropped. Oil investment also fell, and mainland export came in rather weak, pulled down by lower export of services. Employment rose 0.5 percent sequentially and 1.6 percent year-on-year. Norges Bank’s projection suggests quarterly growth at around 0.3 percent.

Softness in demand is expected to be temporary. Solid employment is likely to aid consumption in the future, and solid growth might stimulate investment among the companies, noted Nordea Bank in a research report. Moreover, oil investment is also expected to rise in the future, while weak NOK and strong growth abroad should boost exports.

“We think Norges Bank will conclude in the same way and see today's growth figures as expected. But it will view employment figures as on the strong side. Today’s figure removed the impression that figures for growth and capacity utilization are on the weak side compared to Norges Bank and made us more certain about the September hike”, added Nordea Bank.

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