Norway Economic Rebound Falls Short as Domestic Demand DropsJosiane Kremer
Norway’s economic growth accelerated less than estimated in the first quarter and the nation’s total output contracted as oil and gas production declined.
Gross domestic product, excluding oil, gas and shipping, grew 0.7 percent, after expanding a revised 0.2 percent the prior quarter, Oslo-based Statistics Norway said today. Growth missed the 0.8 percent median estimate of 11 economists in a Bloomberg survey. Total economic output shrank 0.2 percent, compared with a 0.3 percent growth estimate.
“There’s no reason to change the view on Norges Bank based on these figures,” said Katrine Boye, senior economist at Nordea Bank AB. “It shows that growth rebounded in the first quarter after a rather weak fourth quarter. There’s no reason to expect a rate cut.”
Norway’s central bank kept its benchmark interest rate at 1.5 percent last week, refraining from joining central banks from Poland to Australia in easing policy to boost growth and ease pressure on their currencies. Policy makers in western Europe’s second-richest nation per capita have held the bank’s benchmark unchanged for more than a year to avoid gains in the krone, which has emerged as a haven from the euro crisis.
The krone weakened 0.1 percent to 7.5449 per euro as 10:20 a.m. in Oslo.
The recession in the 17-nation euro area, Norway’s biggest trading partner, is starting to hurt the economy of western Europe’s largest oil and gas producer. Weaker demand from abroad caused Norway’s exports to fall 5.9 percent in April. Norsk Hydro ASA, Europe’s third-largest aluminum maker, and other exporters are also struggling with a stronger krone, which is pushing up the cost of Norwegian sales abroad.
Consumer spending grew 1.1 percent in the quarter, while investment gained 1 percent. Exports rose 0.2 percent, after declining 2 percent in the fourth quarter. Petroleum and shipping declined 3.6 percent. Final domestic use of good and services slid 0.2 percent in the quarter.
“An increase in purchases of cars and other transport vehicles, which were especially high in the first two months of the year, contributed in isolation to a rise in goods consumption of 0.8 percentage point and in final consumption expenditures of households in total by 0.4 percentage point,” the statistics agency said.
Cheap loans have fueled private borrowing and boosted house prices to record levels, putting pressure on Norges Bank to raise rates to prevent a housing bubble. While wage increases are boosting consumer spending, krone gains are hurting exporters already suffering from weaker demand from its debt-stricken trading partners.
A rally in the currency, which hit a record on a trade-weighted basis in February, has pushed inflation well below the central bank’s 2.5 percent target, prompting policy makers to hint at a possible rate cut next month.
In Europe, Germany’s economy expanded less than forecast in the first quarter and France’s slipped into recession, according to data released yesterday.
Norges Bank predicts Norway’s mainland economy will grow 2.75 percent this year and 3 percent next year. That compares with an economic contraction of 0.5 percent in the 17-nation region this year, according to European Central Bank forecasts.