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Fast Comment NorwayPreview: Housing prices in June and manufacturing output in May

  1. How long will the current price acceleration in the housing market last?
  2. Norges Bank is expecting to see a more moderate growth rate already from June
  3. Manufacturing output probably rose further in May
How long will the current price acceleration in the housing market last?
The next week’s data include June housing prices (Wednesday) and May manufacturing output (Friday). To recap, according to Eiendom Norge, seasonally-adjusted housing prices troughed in January (-0.2 percent m-o-m), followed by a renewed acceleration. April and May, in particular, saw solid price gains with monthly increases of 1.0 and 1.1 percent (S.A), respectively. Oslo has led the improvement this year. However, in our view, there are reasons to believe that price rises will moderate going forward. First, the supply side in Oslo, expressed by the monthly flow of existing homes approved for sale, has been quite tight so far this year. But a recovery appears to have begun in the middle of May. Second, completions of new construction will rise from the second half of this year and throughout 2019. Third, population growth has fallen materially, and finally, the central bank policy rate is expected to begin rising in September. We do not provide detailed housing price forecasts, but our base case remains a steady increase going forward, albeit, at a more moderate pace than observed over the past few months. This sits well with Norges Bank’s expectations. According to the estimates given in the June Monetary Policy Report, Norges Bank expects monthly growth of around 0.4 percent in June (S.A). Further ahead, Norges Bank expects the monthly growth rate to slow to around 0.2-0.3 percent m-o-m in Q3, and finally 0.1-0.2 percent in Q4.
Manufacturing output probably rose further in May
Manufacturing output had a surprisingly weak start to the year, dropping by 1 percent q-o-q in Q1. However, output rose by 1.1 percent in April, and we believe output rose by a similar amount in May. Even though the (not so reliable) PMI index has fallen from its highs, it is still at robust levels (55.8 in May). More fundamentally, activity among oil supplying industries is increasing, the NOK is still weak, and the growth signals for Q2 remain robust among our key trading partners. We forecast a manufacturing output rise of 1 percent in May.


Marius Gonsholt Hov

Senior Economist


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