• Norway’s mainland economic growth likely to have decelerated inq2 on subdued electricity production

    Source: FxWire Pro - Commentary / 17 Aug 2018 17:25:17   America/New_York

    The growth in Norway’s mainland economy is expected to have slowed down temporarily in the second quarter on subdued electricity production, noted Nordea Bank in a research report. The second quarter data is set to be published next week.

    “We forecast mainland GDP growth at 0.3 percent q/q (2.3 percent y/y) in Q2 down from 0.6 percent in Q1”, noted Nordea Bank.

    Mainland growth has stayed quite stable at 0.6-0.7 percent quarter-on-quarter since the beginning of 2017. Growth at this level is believed to be the main picture also looking ahead. However, in the second quarter the electricity production dropped strongly because of low rainfall, pulling down mainland GDP growth by 0.3 percentage points in the forecast, stated Nordea Bank. It is doubtful whether the central bank has any drop in electricity production in its forecast from June. Electricity production does not influence the output gap and therefore monetary policy.

    “We also expect a picture of mainland demand very close to Norges Bank’s forecast (slow electricity production should show up in weaker net export)”, stated Nordea Bank.

    Overall, the GDP figure is believed to come in line with Norges Bank’s view. The employment data might be slightly on the weak side, but nothing that would alter the central bank’s view significantly. Norges Bank is expected to raise September and with the current weak NOK the chance for an upward revision of the rate path in the September report is expected to be rather high.

    Meanwhile, the third quarter oil investment survey will also be released. The 2018 figure is unlikely to have changed much and all focus would be on the estimate for 2018 investments. The 2019 is expected to be slightly revised up as compared to the 2019 figure seen in the second quarter survey.

    “In that case it will continue to point to solid growth in oil investment next year, say close to 10 percent. Solid growth in oil investment is one reason for our rather optimistic view on the domestic economy. That is also the case for Norges Bank which forecast growth in oil investment at 8.7 percent in 2019”, said Nordea Bank.

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