Inflation Ticks Lower In Norway
Despite an accelerating pace of growth, Norway’s monetary authorities are managing to keep price inflation in check. The latest inflation statistics released this morning suggest that the rate of price growth has ticked down a notch to read at 2.1%, this was largely forecast by analysts following the unexpected jump two months ago.
The Norwegian GDP figures for the second quarter came in at 1.2% when finalised in August, this positively surprised economists and markets who were anticipating a figure of only half that. Growth in Q1 was only 0.5% and there no obvious signs that the economy was improving at the rate ultimately achieved. Prior to the good economic news, the Central Bank was preparing markets for a cut to the country’s key interest rate, this now looks like remaining on hold at 1.5% for the near term with speculation mounting that the next move might in fact be monetary tightening. However with inflation under control this too is looking less and less likely, particularly given the economies ties with Russia and the uncertainty of Russian markets in the face of growing sanctions.
As Europe’s largest oil producer, Norway has some insulation from the vagaries of global economic turmoil but rising costs in the industry and a levelling off in oil prices have stalled investment in this area of the economy. The fall off in investment is estimated to be around 15% so far this year, this is unlikely to impact this years overall GDP growth figures which are on track for 2.0% overall in 2015 but projections are for the underinvestment to contribute to a 2016 growth rate of just 1.6%.
Regardless of the oil situation, there are two very strong economic areas pushing Norway’s growth in the meantime. Consumer demand has picked up substantially and the manufacturing sector posted 2.5% growth during the second quarter.
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