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Fast Comment NorwayPreview: Retail spending and registered unemployment

  1. Small changes to the near-term unemployment rate (registered)
  2. Solid rebound in retail spending in Q2
  3. For the moment, the Norwegian economy is escaping the global slowdown
Small changes to the near-term unemployment rate (registered)
Next week we will see figures for retail sales in June (Tuesday) and registered unemployment in July (Friday). Starting with the latter: the backdrop remains for firm employment growth (as signalled by Norges Bank’s Regional Network), exceeding the underlying growth rate for the working age population. In isolation, this should continue to push the unemployment rate downward. However, the labour force participation rate, which recovered sharply throughout 2018, has eased again over the past few months. We struggle to see any natural explanation for this, and thus we believe there is scope for some upward correction again which, if true, will boost the supply side of the labour market. We therefore expect that some of the increase in overall employment will be absorbed by an increasing supply of labour; hence, we foresee small changes to the unemployment rate in the near term. In line with these arguments, we expect that the seasonally adjusted unemployment rate was unchanged in July at 2.2 percent. This implies an unadjusted unemployment rate of 2.3 percent, up from 2.1 percent in June.
Solid rebound in retail spending in Q2
Turning to retail spending, May saw a significant drop of 1.3 percent m-o-m, but that followed an even sharper increase in April of 1.9 percent. Overall, the trend has turned positive over the past few months, supported by solid fundamentals: robust employment growth and a pickup in nominal wage growth, which is now exceeding the overall inflation rate. We forecast retail spending rose by 0.7 percent in June, which implies solid quarterly growth of 1.2 percent in Q2, following a lacklustre pace of zero percent growth in Q1. The figures bode well for a sharp rebound in mainland GDP growth in Q2, following what was a temporary slowdown in Q1. Generally speaking, the current state of the real economy remains robust and, for the moment, the Norwegian economy is escaping the global slowdown.


Marius Gonsholt Hov

Senior Economist


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