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Fast Comment NorwayPreview: CPI-ATE, manufacturing output and credit indicator growth

  1. CPI-ATE expected at 1.2 percent in July, up from 1.1 percent in June
  2. In line with Norges Bank
  3. Probably higher manufacturing output, but lower debt growth in June
CPI-ATE expected at 1.2 percent in July, up from 1.1 percent in June
The daily report will return tomorrow morning and here is a quick run through of the key data that will be released this week. We will see figures for both manufacturing output and credit indicator growth in June (Tuesday and Thursday, respectively), but most importantly we will see July data for core inflation (Friday). Starting off with the latter, recall that Norges Bank lowered its near-term estimates for the CPI-ATE in the June Monetary Policy report; a wise choice, as the outcome for June (1.1 percent) matched the Bank’s estimate (as well as our own and consensus). We also stick to Norges Bank’s estimate for July, which implies a small rise in the y-o-y rate, to 1.2 percent for the CPI-ATE. However, that requires a relatively solid monthly change, compared to the long-run average for July. This pattern has, however, changed over the past few years; i.e. since 2013 the July readings have been well above the historical norm. We believe the same was repeated in July this year, which should give a small rise in the y-o-y rate. Finally, the usual reminder: these figures are volatile throughout the summer months, and thus we prefer to smooth through June-August before jumping to conclusions. So far, however, developments have been in line with Norges Bank’s estimates.
Probably higher manufacturing output, but lower debt growth in June
We expect to see manufacturing output up by 1.0 percent m-o-m in June, following the disappointing decline in May (-0.7 percent). The recent decline in the manufacturing PMI got some attention, as it dropped down into a slightly contractionary territory. However, this indicator is fairly useless and we therefore pay more attention to the quarterly business tendency survey, which has continued to strengthen. Although we must admit manufacturing output has been a bit weaker than expected this year, the trend is still pointing upwards. Finally, with regards to credit indicator growth, we expect a slight decline in the y-o-y rate, to 5.9 percent (it was 6.0 percent in May). The key reason is a base-effect. To be more precise, underlying debt growth was very strong among the non-financial corporations in June last year. We doubt this was repeated this year, and thus we expect to see a significant decline in the annual growth rate for this sector, which again should be enough to lower the overall growth rate for the C2 total.


Disclaimer

Marius Gonsholt Hov

Senior Economist

Norway

maho60@handelsbanken.no

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