Norwegian mainland economy expands strongly in Q2

Growth in Norway’s mainland economy was solid and employment is rising at a strong rate. Still a rate hike is not on the agenda with low inflation and wage growth. Mainland GDP expanded 0.7 percent sequentially and 1.7 percent year-on-year in the second quarter following a growth of 0.7 percent in the first quarter. Consensus forecast was 0.6 percent.

The main scenario was quite expected. Growth was widespread with healthy growth in both production of goods and services. The demand picture was also solid with strong growth in both mainland demand and mainland export. Private consumption rose 1 percent sequentially while residential investments rose 1.8 percent. Investment among the companies was slightly mixed, but with a sharp drop in manufacturing.

Employment in Norway rose 0.4 percent quarter-on-quarter and is up 0.9 percent year-on-year. These are the best figures for employment and these figures remove all doubts.

Today’s figure was on the strong side to Norges Bank’s view, noted Nordea Bank. Norges Bank’s forecast assumes growth in employment at around 0.2 percent to 0.3 percent a quarter. However, inflation and wage growth is low and would continue to be low for a long period.

Meanwhile, the third quarter oil investment is still difficult to interpret. During the first glance, it might give the impression that investments in 2018 would drop 9 percent. However, as in the second quarter survey Statistic Norway listed several projects that would give activity in 2018.  According to Statistic Norway, this would give a considerably higher investment in 2018.

“Since the investment level in 2018 was revised down 1.5 percent compared to the Q2 survey it is possibly that Norges Bank will adjust its 2018 forecast (currently +1 percent) marginally down”, added Nordea Bank.

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