Downturn in Norway’s oil-related industries continue, growth outside oil sector remains solid

In the second half of 2015, the Norwegian economy did not see any growth. According to the revised GDP data, Norway recorded more or less zero growth in mainland GDP in Q3 and Q4. Meanwhile, the annual rate reached 1%, as compared with Danske Bank’s projection of 1.4% in its last report. Growth in manufacturing and several service industries has weakened due to decline in oil investment. Also lower real wage growth and higher unemployment are dampening housing investment and private consumption growth.

Meanwhile, mainland exports and government demand have recorded solid growth. The regional network survey of Norges Bank indicates towards slight growth in output, slightly more than zero, in the next six months.

“Once we factor in a growth contribution from the public sector, which is poorly covered by the regional network survey, we are looking at growth of 0.2% q/q in Q1”, says Danske Bank.

The primary data confirms that sluggishness remains in oil-related industries, which is because of further collapse in oil price and prompting additional reductions in investment budgets if oil firms. The February oil industry investment survey confirmed this; projections were downwardly revised for 2016 to NOK 164 billion from NOL 171 billion.

Meanwhile, there is very little evidence in the data that implies that the weakness is spreading. Companies in all sectors, excluding oil and business services are posting better growth outlook as compared to November’s. Particularly, producers in the consumer services and domestic market report positive outlook, added Danske Bank.

So far, data released for 2016 does not indicate any signs of recession. In January, goods consumption expanded. Also, housing starts are still increase, exports appear to be shifting sideways and fall in industrial output is alleviating. Moreover, the increase in joblessness appears to be easing and the total number of jobs available is increasing. These two factors indicate that growth excluding the oil sector continues to be strong, according to Danske Bank.