Norway’s Economy Expands Faster Than Estimated in Fourth Quarter

Norway’s economic growth accelerated more than estimated in the fourth quarter, reaching the fastest pace in more than four years, boosted by consumer spending in what were a weak three months for investments.

Mainland gross domestic product, excluding oil and shipping, rose 0.9 percent in the quarter, the most since June 2014, Statistics Norway said on Friday. A Bloomberg survey of 12 economists predicted an expansion of 0.8 percent, while the central bank forecast 0.7 percent growth.

Key Insights:

  • Norway’s central bank raised rates for the first time in seven years in September and has signaled that another rate increase would “most likely” come in March.
  • Consumer spending held up in the quarter even after the first rate increase, while mainland goods exports withstood a broader decline driven by falling oil and gas sales.
  • Growth rebounded after being more muted than predicted by the central bank for most of 2018, hurt by the summer drought and high electricity prices that eroded consumer spending.
  • Unemployment has kept below 4 percent, giving backing to the central bank’s expectations of increasing wage pressure.
  • Underlying inflation is above the bank’s policy mandate of 2 percent, propped up by a currency weakening that has lifted inflation. Headline inflation has been pushed up by electricity prices.
  • Rising crude prices over the course of 2018 have revived the offshore industry and Statistics Norway sees petroleum investments rising by 10 percent amid cost cuts and improved profitability in new oil fields. Brent crude slid by almost 30 percent in the fourth quarter, but has since rebounded and is now trading above $60 a barrel.
  • The mainland economy expanded 2.2 percent for all of 2018, up from 2 percent the previous year.


  • The krone rose 0.05 percent to 9.7436 per euro as of 8:11 a.m. in Oslo.

What Economists Say:

  • “Better-than-expected headlines clearly supports case of further rate hikes this year from” Norges Bank, said Kristoffer Kjaer Lomholt, an economist at Danske Bank. We clearly still like to be long the krone on this print, he said.
  • “Norges Bank will most likely conclude that overall capacity utilization is somewhat higher than assumed in December. All told, the data supports our expectation for a rate hike in March,” said Marius Gonsholt Hov, an economist at Handelsbanken. The key story for 2019 will be the economic support given by the renewed rise in petroleum investments, he said.
  • Given that the third quarter was also revised up by 0.1 percentage point, “we are even more sure that the underlying momentum in the Norwegian economy well warrants more interest hikes,” said Kjetil Martinsen, an economist at Swedbank. “The doves are gathering among central banks (Fed, ECB, BoE), but I believe Norges Bank will remain one of the most hawkish as long as the global economy doesn’t see a full meltdown.”

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