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Fast Comment NorwayRegional Network: Near-term growth outlook still solid, but signals have dropped from peak levels (as we expected)

  1. Downward revisions to the near-term growth outlook; close enough to our expectations
  2. Employment growth expectations slightly down as well
  3. In sum, the probability of a rate hike in September has been lowered
Downward revisions to the near-term growth outlook; close enough to our expectations
According to the contacts in Norges Bank’s Regional Network, the headline indicator was lowered to 1.35 in August, down from 1.57 in the previous survey. The downward revision was close enough to our estimate of 1.38. Converted to quarterly growth rates, the figures imply a quarterly expansion of 0.675 percent, down from 0.785 percent in the previous survey. In other words, the near-term growth signals are still strong, but at the same time lowered by 0.11 percentage points. Digging into the details, almost all sectors lowered their growth expectations this time. Overall capacity utilisation was little changed: capacity constraints at the corporate level edged a bit higher, whereas labour supply constraints were lowered slightly. Also, note from the chart below that labour supply constraints are close to the historical average, signalling that the labour market – as we have argued repeatedly – is not particularly tight at the moment. Expected employment growth for the next three months was also lowered by 0.1 percentage points this time. All told, the survey clearly gives the impression that the momentum has dropped from peak levels, which is also in line with the signals given by other surveys. With regards to the outlook for the key policy rate path, the signals are fairly neutral to the key policy rate outlook, in our view, although the change of momentum suggests there is indeed no rush for another rate hike by Norges Bank. In sum, the probability for a hike in September – as indicated by around 70 percent probability in the rate path from June – has been lowered slightly by today’s batch of data.


Disclaimer

Marius Gonsholt Hov

Senior Economist

Norway

maho60@handelsbanken.no

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