Norway’s economy continued to eke out gains in November as car purchases helped outweigh the hit on consumption from higher prices and borrowing costs.
(Bloomberg) — Norway’s economy continued to eke out gains in November as car purchases helped outweigh the hit on consumption from higher prices and borrowing costs.
Mainland gross domestic product, which excludes the country’s offshore oil and gas industry, gained 0.2%, the statistics office said on Thursday. That was in line with the median estimate in a Bloomberg survey of economists, while Norges Bank was expecting a 0.2% decline.
Rising car purchases boosted household consumption by 1.2% in November from the prior month, as people bought more vehicles to avoid tax hikes at the start of the year and as earlier production problems had delayed deliveries, the statistics office said.
The data is likely to strengthen the case for the central bank to proceed with one more quarter-point hike to 3.0% in March and will revive bets for another increase in June, even as Norway’s headline inflation slowed at the end of the year to its weakest pace in seven months.
“This suggests that the economy is more resilient than previously assumed and may be able to handle interest-rate hikes better than expected,” DNB Bank ASA’s Senior Economist Kyrre Aamdal said in a note to clients. “Today’s GDP data support further rate hikes, most likely in March and an increased support for a June hike as well.”
Norway’s economy continued to grow last year ahead of the central bank’s forecasts, helped by European demand for its fuel exports after the end of natural gas shipments by Russia.
The outlook has since worsened, as weaker household purchasing power reduces demand in retail trade and services, especially restaurants and hotels. The central bank sees gross domestic product shrinking 0.2% this year as its regional survey last month signaled the worst outlook for the economy since the financial crisis. That’s as several local forecasters still project a weak expansion.
Read More: Norway Inflation Slows Most Since May, Cooling Rate Pressure
“Overall, for Norges Bank, today’s news on the economic activity point in the direction of them sticking to the plan of ‘most likely’ hiking the policy rate in March,” Swedbank AB’s chief economist for Norway, Kjetil Martinsen, said in a note to clients. “We still have that as our baseline for the peak policy rate, but risks are skewed toward another hike in June.”
–With assistance from Joel Rinneby and Harumi Ichikura.
(Updates with analyst comments, chart from fourth paragraph.)
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