Fast Comment NorwayManufacturing output continues to surprise on the downside

Manufacturing output had a surprisingly weak start to the year, dropping by 1 percent q-o-q in Q1. However, output rose by a welcoming 1.1 percent in April, and we and consensus expected gains were extended into May. Consensus was for 0.3 percent, whereas we had anticipated 1.0 percent. But the actual outcome showed a drop of 0.7 percent in May. As shown in the chart below, the trend remains rather flat; output growth has been around zero percent over the past three months compared to the previous three-month period (non-overlapping), despite the supplying industries growing robustly again on the back of rising petroleum investments. Note that ships, boats and oil platforms have seen production growth of 5.1 percent over the past three months. But this was offset by production declines within the industry grouping refined petroleum, chemicals and pharmaceuticals (down 3.1 percent), as well as declines within wood and wood products. All told, manufacturing output as a whole continues to surprise on the downside, despite healthy sentiment, a still weak NOK and solid growth among our key trading partners. However, overall growth signals for the mainland economy remain robust, and we continue to believe that Norges Bank will hike its policy rate in September.