Norwegian mainland GDP growth likely to have accelerated slightly in Q3 2018

Norwegian mainland GDP growth and demand figures, which are set to be released tomorrow, are likely to be somewhat on the soft side. However, solid employment signifies that the figures would be neutral to the coming rate path.

According to a Nordea Bank research report, the mainland GDP is likely to have grown 0.6 percent on a quarterly basis, a slight acceleration from 0.5 percent seen in the second quarter. Norges Bank expects the economy to have grown 0.7 percent. On a year-on-year basis, the economy is likely to have grown 2.3 percent.

The monthly production of electricity and agriculture was temporarily low in August and is likely to have recovered solidly in September.  Moreover, figures received for the previous months might argue for an upward revision.

Partially based on the monthly GDP figures, the risk of a considerable downside surprise to the production figures to be small. Nevertheless, the monthly national accounts figure indicates toward a rather soft picture for mainland demand. Especially running development in private consumption is significant for Norges Bank and the third quarter figure is expected to be rather weak.

Overall, the GDP and the demand figure might be slightly below the central bank’s forecast and argue for a slightly lower rate path in December. Nevertheless, the third quarter employment figure out together with GDP figure is believed to be at least as significant to Norges Bank’s view. Employment and unemployment figures continuously surprising on the solid side was a significant factor behind Norges Bank increasingly hawkish stance until the June report.

“Norges Bank forecasts an employment growth of 0.3 percent q/q in Q3. Based on running labour market figures, we see the risk to be on the upside. If we are right that should counteract the impression from the somewhat weaker demand and production picture”, added Nordea Bank.