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Fast Comment NorwayRegional Network (preview): Growth may be passing a peak (q-o-q), but is still running above trend

  1. Regional Network has overstated growth this year
  2. Some lowering of growth expectations in the pipeline...
  3. ...but growth should still run above trend; we still expect two more interest rate hikes in 2019
Growth should still run above trend; we still expect two more interest rate hikes in 2019
An update from Norges Bank’s Regional Network is due next Tuesday. To recap, its figures have, at least to some extent, overstated the actual pace of growth seen so far this year. On average, the mainland economy has expanded by a quarterly pace of 0.5 percent. Some of the growth fluctuations seen this year have been driven by the volatile component electricity transmission. However, these swings have been both ways, and on average, mainland GDP excluding electricity has also been 0.5 percent q-o-q this year. Meanwhile, the past-three-month rates from the Network have signalled a pace of around 0.65 percent, with a running-six-month-outlook of 0.73 percent q-o-q. Having said that, we believe some of the recent weakness in the GDP data can be explained by temporary factors (such as the drought.) At the same time, however, there are some tendencies toward weakening momentum as well, similar to those seen in Norway’s key trading partners. Judging from the recently released Expectations Survey from Norges Bank, which indicated lower profitability prospects over the next 12 months, we see scope for some lowering of the six-month-outlook from the Regional Network. However, the change will probably not be large. We should also take into account that the Network contacts are now looking into 2019, a year when petroleum investments should rise substantially, and thus offer welcome gains for the supplying industries. In this regard, note that we also will see figures for manufacturing output next week, where we anticipate 1 percent m-o-m in October, more than offsetting the declines seen in August and September. To sum up our expectations for the Regional Network: we continue to believe that the contacts will report growth rates that are still above the potential for the economy. Thus we stick to our expectation of two more rate hikes from Norges Bank in 2019. However, the current state of the real economy, as well as the outlook, is probably skewed a bit to the downside of Norges Bank’s expectations; in isolation suggesting some lowering of Norges Bank’s rate path at the upcoming interest rate meeting (December 13). We will return with a full update on Norges Bank by the end of next week.


Marius Gonsholt Hov

Senior Economist


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