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Norway's Q3 GDP shows first contraction since December quarter of 2015

Norway's economy slips into contraction in Q3 following stagnation in the previous three months. Data released by Statistics Norway on Tuesday showed that Norwegian economy shrank 0.5 percent quarter-on-quarter in the third quarter of 2016 from 0.0 percent in Q2. It was the first contraction since the December quarter of 2015. Year-on-year, the economy contracted 0.9 percent, following a 2.5 percent expansion in the previous quarter. It was the first contraction since the June quarter 2014.

Mainland GDP rose by 0.2 percent from the second to third quarter, lower than both the Norges Bank’s and consensus forecast at 0.4 percent and 0.3 percent respectively. The second quarter growth was kept unchanged at 0.4 percent. GDP figures show a slightly weaker growth in the Norwegian economy than the figures for the second quarter indicated.

Details of the report showed that the slump was driven by a decline in petroleum activities and ocean transport (-3.1 percent from -1.8 percent in Q2) while government spending slowed (+0.4 percent from +0.7 percent) and a weak household spending (+0.0 percent from +0.4 percent). On the positive side, investment grew by 2.6 percent, rebounding from a 0.2 percent fall in Q2. Exports also rose 1.1 percent (from -1.4 percent). Imports went up 0.3 percent (from -2.6 percent).

"We have all the time been clear that Q2 figures were affected by some transitory factors and that the underlying growth was weaker. In isolation, this points to a rate cut. But high growth in debt and house prices, continued economic growth and persistently weak krone implies that interest rates will by kept unchanged at this point," said DNB Markets in a report to clients.

At around 1230 GMT, FxWirePro's Hourly USD Strength Index stood at 112.449 (highly bullish). For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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