(Bloomberg) — Norway’s economic growth continued to exceed central bank’s forecasts at the end of last year, boosting expectations that Norges Bank may prolong its tightening campaign.
(Bloomberg) — Norway’s economic growth continued to exceed central bank’s forecasts at the end of last year, boosting expectations that Norges Bank may prolong its tightening campaign.
Mainland gross domestic product, which doesn’t include Norway’s offshore industry, expanded 0.8% in the fourth quarter from the previous three months, the statistics office said on Wednesday. This matched the median projection in a Bloomberg survey of analysts, while the central bank had forecast no change.
The continued spending growth by households backs earlier evidence that the fossil-fuel-rich Nordic economy remains more resilient to the slump in purchasing power and monetary tightening than authorities have expected. It also fuels bets that policy makers will extend their interest-rate hikes beyond the current plan of about 3%.
“Activity held up surprisingly well towards the end of last year,” Frank Jullum, chief economist for Norway at Danske Bank A/S, said. It “confirms the case for a March hike and increases the probability of further hikes.”
The krone, which has lost the most in the G-10 group of major currencies this year, weakened after the report, trading 0.5% lower at 10.9385 versus the euro at 9:08 a.m. in Oslo.
Bets for interest-rate hikes by June increased by another 5 basis points to 92 basis points, according to forward-rate agreements that are used to speculate on borrowing costs.
Fourth-quarter growth was underpinned by Norwegians buying more cars at the end of last year ahead of tax hikes in January, helping boost household consumption by 5.9% from the previous quarter, the biggest gain in more than a year. Spending on services also continued to grow, up by 1.1%.
The pent-up spending helped boost full-year growth in mainland Norway to 3.8%, the office said. The central bank sees GDP shrinking 0.2% this year.
Among Norway’s neighbors, Denmark reported a pharmaceuticals-driven jump in growth in the final quarter of the year and Finland entered a recession, data from those countries showed on Tuesday. The largest Nordic nation, Sweden, saw its economy unexpectedly contract in the fourth quarter.
“The key question is whether we will see two, and not just one, additional rate hikes beyond the one that we will definitely see in March,” Marius Gonsholt Hov, Svenska Handelsbanken AB’s chief economist for Norway, said in a note to clients. “With all things considered — a stronger real economy and not least stronger wage and inflationary pressures — the market is currently leaning towards the key policy rate peaking at 3.5%.”
–With assistance from Joel Rinneby, Harumi Ichikura and Zoe Schneeweiss.
(Updates with krone, analyst comments from fourth paragraph.)
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