Norway's Regional Network implies slowing growth

The Regional Network report indicates that growth is slowing. However, Norges Bank will not dramatically change view on growth based on this and rates are expected to be kept on hold at the Monetary Policy meeting in September.

The reginal network indicted a growth at 0.05 q/q in Q3. Norges Bank forecast is 0.25 %. Even taking into account that the network lately has been on the downside to actual GDP growth we would judge this as slightly on the weak side. 

The firms expect growth to slow further in the next quarter, also weaker than Norges Bank's forecast: However, Norges Bank has given less weight to the Network's expectation indicator compared to the judgement of the current situation.

Few surprises are found in the report. Growth is close to zero due to falling production in oil related industries. Most noteworthy is perhaps that business to business services, as last month, reports of falling production. That is the only sign of any second hand effects form the oil downturn. 

Most other part of the economy is holding up well. Growth in mainland exports outside oil related capital goods is reporting of increasing production, obviously an NOK effect.

Capacituy utilization is falling, but not more than forecasted by Norges Bank. The firms reports of change in employment very cloise to zero and actualy marginaly better than last quarter.

"If anything the Network is marginally on the weak side to Norges Bank's forecast. However, it shows that there is no crisis in the economy so we see no reason for Norges Bank to dramatically change view on growth and capacity utilization. With the economy developing roughly as expected there is no rush to cut rates. Due to the weak NOK we think rates will be kept on hold in September", says Nordea Bank.