Norway Expands Slower Than Estimated as Oil Slump Nears End

  • Petroleum investments rise for first time in 13 quarters
  • Employment growth continues at slow pace of 0.1 percent

Norway’s economic growth picked up slower than anticipated in the fourth quarter as western Europe’s biggest crude producer emerges from a protracted slump in its oil industry.

Mainland gross domestic product, which excludes oil, gas and shipping, grew 0.3 percent from the previous quarter, Statistics Norway said Thursday. Economists surveyed by Bloomberg had estimated a gain of 0.4 percent. Total gross domestic product jumped 1.1 percent, as petroleum investments rose for the first time in 13 quarters.

“It’s too soon to conclude that petroleum investments have turned positive as operators on the continental shelf have signaled they will scale down investments by around 10 percent this year,” Marius Gonsholt Hov, an economist at Handelsbanken in Oslo, said in a note. “Still, this marks a slower contraction compared to 2015 and 2016.”

Thanks to massive government spending of its oil wealth, record low interest rates and a weak krone, Norway’s $400 billion economy has avoided an outright recession amid the worst slump for its oil industry in a generation. A rally in the oil price amid OPEC production cuts has also raised optimism in the battered industry, which has cut more than 40,000 jobs in Norway over the past three years.

Central bank Governor Oystein Olsen has signaled that he’s done with cutting rates after hitting a record low of 0.5 percent, in part due to concerns about surging property prices. The mainland GDP reading was largely in line with the central bank’s forecast of 0.34 percent.

The GDP report was “broadly in line with expectations” and fits well with Norges Bank’s forecast for 1.5 percent mainland growth this year, according to Gonsholt Hov. “But growth is still subject to downside risks, in our view,” he said.

The 0.1 percent expansion in employment toward the end of the year is “too weak to keep unemployment in check,” he said. “But labor force participation is declining, something that keeps the unemployment rate from rising any further. The pattern can hardly be characterized as an improvement in the labor market.”

Consumer spending rose 0.7 percent in the quarter, while exports fell 1.3 percent and public spending rose 0.5 percent. Investment rose 0.6 percent in the period. The agency said that preliminary calculations showed that petroleum investment grew by 3.6 percent in the quarter after a continuous decline since the third quarter of 2013.

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