Norway’s economy stagnated after a year of growth, faced with weaker consumption and showing the fossil-fuel rich Nordic nation is finally feeling the pinch of higher inflation and rising borrowing costs.
(Bloomberg) — Norway’s economy stagnated after a year of growth, faced with weaker consumption and showing the fossil-fuel rich Nordic nation is finally feeling the pinch of higher inflation and rising borrowing costs.
Mainland gross domestic product, which excludes Norway’s offshore industry, was unchanged from the previous three months, when it grew 0.2%, the statistics office said on Tuesday. Analysts surveyed by Bloomberg had projected an increase of 0.1%, the same as Norges Bank’s forecast from June.
The Nordic nation has so far been more resilient than most of its regional peers to fallout from lower purchasing power and surging credit costs. The stagnation is still largely in line with Norges Bank’s outlook and won’t derail an expected increase in the key rate to 4.25% next month, analysts said.
“Growth is clearly coming down and has been below trend in the first half, driven mainly by a slowdown in private consumption and residential investments on a cocktail of higher rates and negative real wage growth,” Danske Bank A/S’s economist Frank Jullum said.
The krone, the second weakest performer in the G-10 space of major currencies this year, gained slightly following the report, trading 0.2% higher at 11.5533 versus the euro at 9:48 a.m. in Oslo.
Last quarter, construction had the biggest negative impact on GDP, the office said, with housing investments falling. Apart from car purchases, which were exceptionally low in the first quarter, household consumption fell in the second quarter, it added.
The mainland economy will grow 1.2% for the full year and 0.2% in 2024, the central bank forecast in June.
The data follows a quarterly expectations survey unveiled by the central bank last week that showed wage projections by labor market parties have been revised clearly higher for next year.
“The economy is grinding down — but so far, much as Norges Bank has expected — and with still elevated wage- and price prospects, the outlook remains for yet another rate hike in September,” Marius Gonsholt Hov, Svenska Handelsbanken AB’s chief economist for Norway, said in a note.
–With assistance from Joel Rinneby.
(Updates with analysts’ comments, krone reaction.)
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