The Norwegian central bank has published its regional network report for Q2. According to the report, the overall output growth in Norway has been subdued in the past three months, on par with enterprises’ February projections. Strong gains in public demand and enhanced competitiveness have helped in a marginal rise in the overall level of activity. Household services and traditional manufacturing is still reported to have strongest growth, whereas the oil service sector has recorded the sharpest drop in output.
Since February, outlook has been upwardly revised marginally; however, output growth is expected to remain subdued in the next six months. According to enterprises, oil sector demand is likely to keep declining, whereas public sector demand is likely to improve further.
The main indicator (current situation) was 0.16. This points to a growth of 0.08% q/q in the second quarter. The central bank projects the economy to grow 0.3% in Q2. According to the forward looking indicator, the Norwegian economy is likely to expand 0.14% q/q in the coming quarters.
There is no change in the main domestic picture. Oil sector is weighing strongly on the economic growth. There are no evident signals of solid second hand impacts from the downturn in oil industry. Meanwhile, the retail sector continues to hold up despite the weak retail sales development.
Amongst enterprise, levels of capacity utilization continue to be low. Meanwhile, labor supply is ample, report enterprises. The level of employment is little changed and is likely to remain almost unchanged in the next three years. The survey suggests that the overall annual wage growth is expected to be 2.3% this year, as compared with the earlier estimate of 2.4%.
The Norges Bank should be reassured with the projection that the Norwegian economy is expected to recover in the second quarter; however, the recovery will be slight and growth will be lower than the central bank’s projections, noted Nordea Bank in a research report.
Meanwhile, the aggregated output index for the coming six months rose from 0.11 in March to 0.28. This suggests an improved growth outlook, said Danske Bank. In particular, the RNS suggests that the mainland GDP is expected to expand by around 0.3%-0.4% in sequential basis in the third and fourth quarter of 2016, consistent with the central bank’s March Monetary Policy Report’s assumptions.
Today’s release underpins the view that the central bank will keep the rates on hold in June and lower in September by 25bp, said Danske Bank in a research report. At present, markets are projecting around one full rate reduction on a 12 month horizon.
“In terms of EUR/NOK, we think the very short-term risks (coming days) are skewed to the downside but we still look for a summer move higher towards 9.40”, noted Danske Bank.
The material has been provided by InstaForex Company – www.instaforex.com