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Fast Comment NorwayRegional Network: Solid output growth; supporting two rate hikes in 2019

  1. Growth signals revised marginally upwards; better than generally expected
  2. Offsetting weaker GDP prints released earlier this year
  3. Supporting two rate hikes in 2019
Growth signals revised marginally upwards; better than generally expected
The recently released report from Norges Bank’s Regional Network shows output signals of 0.69 percent q-o-q over the past three months, and 0.75 percent for the coming six months. The growth signals were revised up marginally from the previous round (up from 0.68 and 0.73 percent, respectively). Based on the information from the separate Expectations Survey we had anticipated still-strong signals from the Network, although we expected the growth estimates to be lowered slightly from the previous round. No consensus estimate was available this time. But judging from the reaction in the currency market (EUR/NOK down by 0.3 percent), the market was skewed towards a slight downward adjustment as well. However, the main message is that the Network confirms the economy is running well above trend (in q-o-q terms). This was the key confirmation we were looking for today. According to the press statement, higher activity in the oil sector, higher public investment and digitalisation in both the private and public sector contribute most to growth. Further from the details we note that employment growth is holding up well, and overall capacity utilization has increased to levels slightly above the historical average. Labour supply constraints are also picking up, but are still running below its average, however. Wage expectations were little changed: The contacts are still expecting wage growth of 2.8 percent this year, increasing slightly to 2.9 percent in 2019. In comparison Norges Bank has forecast 2.8 percent in 2018 and 3.2 percent in 2019. All told, mainland GDP has performed a bit weaker than anticipated by Norges Bank this year. But this will be offset by the solid signals from the Regional Network. We continue to stick to our expectation of two more rate hikes from Norges Bank in 2019.


Marius Gonsholt Hov

Senior Economist


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