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Fundamentals in Norway remain strong – Danske Bank

Analysts at Danske Bank assessed yesterday’s release of the key Regional Network Survey by the Norges Bank.

Key Quotes

Norges Bank has just published the November Regional Network Survey, which is its preferred gauge of economic activity. The aggregated output index (next six months) rose from 1.11 to 1.19 .This translates to 0.6% q/q growth in mainland GDP for the next two quarters. This is exactly in line with Norges Bank’s projection from the MPR in September (+0.6%). In isolation, domestic growth will give a neutral contribution to the rate path in the new MPR next week. Meanwhile, the combination of higher capacity utilisation, a weak NOK and higher oil prices will add substantial upward pressure on Norges Bank at its meeting next week, despite a cooling housing market”.

“Higher growth in all sectors apart from construction. Most noteworthy, both domestic and export related oil industries are back in positive growth territory for the first time since May 2014. Capacity constraints, a proxy for the output gap, are up from 28.26 to 30.36, the highest in four years. Also, profitability is now at the highest level since May 2011. On the negative side, expected employment growth dropped marginally from 0.36 to 0.26, and wage expectations are 2.63% in 2018, clearly on the downside compared to NB’s projection of 2.8% from September MPR. Overall, the report suggests growth continues to be above trend, and capacity utilisation seems to be rising faster than expected by Norges Bank”.

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