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Fast Comment NorwayPreview: GDP, manufacturing output and housing prices

  1. Mainland GDP growth holding up well in the near term
  2. Upside risk to Norges Bank's near-term estimate; supporting a rate hike in March
  3. Housing market: Modestly positive outlook for Q1 (and 2019 as a whole)
Mainland GDP growth holding up well in the near term; upside risk to Norges Bank
Mainland GDP growth slowed to well below expectations in Q3 last year, hitting 0.3 percent, down from 0.7 percent in Q2. However, the press statement and the details made it clear that this was mainly due to the drought. The agricultural sector was particularly hard hit; here, output fell by almost 30 percent, which knocked 0.2 off the quarterly GDP rate. But general expectations have been for a solid rebound in the final quarter of 2018. The data released so far supports this assessment. Monthly GDP data until November picked up to a three-month pace of 0.6 percent, with general growth for most areas. As shown in the chart below, the three-month growth rate was in particular boosted by the sharp rise in October (the monthly figures are volatile), whereas November was flat. And even when allowing for a soft reading in December as well, the growth rate for Q4 as a whole will have rebounded solidly. We anticipate mainland GDP growth of 0.9 percent in the final quarter of 2018. In comparison, Norges Bank has forecast 0.7 percent; however, the upside risk to this estimate was already addressed in the latest press statement (January). In short, the near-term momentum for the mainland economy remains robust, in line with Norges Bank’s strategy of a rate rise in March (which is also our expectation). Further ahead, we believe overall growth will hold up well this year, buoyed in particular by a sharp rise in petroleum investments, which again will boost activity the among oil supplying industries. In this regard, we also note that manufacturing data for December are up next week. Here, we anticipate output growth of 0.8, following a flat reading in November. As a final note: We expect a sharp slowing of GDP growth beyond this year, as the petroleum sector yet again becomes a drag on growth at the same time as the global economy slows. But that is a story for another time. In the near term, the outlook remains solid enough for Norges Bank to continue to hike its policy rate this year. We maintain our call for two rate rises this year (March and September).
Housing market: Modestly positive outlook for Q1
Housing prices for January are up next Tuesday. The backdrop should be well-known by now: National housing prices have levelled out/increased marginally since June last year, in seasonally adjusted terms. Trends have been slightly weaker in Oslo, but, in any case, the monthly growth figures have been close to zero (S.A). Activity has stayed high: Both the flow of units approved for sale and actual housing transactions have stayed in the upper range, without the necessity of price adjustments to clear the market (cf. broadly stable prices over the past seven months). As shown below, the supply and demand balance indicates moderately rising housing prices in Q1, in seasonally adjusted terms. A final reminder: Nominal housing prices “always” increase in January, and we would be kicking on open doors by claiming a nominal increase also this year. This is not the point. The key insight is that the outlook for Q1 as a whole is moderately positive, also in seasonally adjusted terms. The monthly figures will continue to be volatile, however, and thus we warn against extrapolating from the latest data point. But we maintain our call for a moderate increase in average housing prices this year.


Marius Gonsholt Hov

Senior Economist


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