Norway Economic Outlook
Following a marginal GDP expansion in Q4, conditions grew more challenging at the outset of 2023. GDP slid 0.2% month on month in January. Private consumption plunged by over 10% in the month, marking the sharpest downturn since the outbreak of the pandemic in March 2020. Moreover, in January, the unemployment rate increased to a 14-month high and price pressures intensified, contributing to household spending’s retreat. Meanwhile, imports of goods and services contracted at a steeper pace than in December. Fixed investment also swung to a contraction, which more than offset a marginal uptick in public spending growth. Lastly, exports of goods and services declined in January. Furthermore, in February, the manufacturing PMI fell to a 30-month low as conditions deteriorated markedly. In late March, Norges Bank increased interest rates further, boding ill for credit and investment.
Inflation eased to 6.3% in February (January: 7.0%) amid softer price increases for housing and utilities. Similarly, core inflation also moderated, falling to 5.9%. While our panelists believe the downward trend will continue through Q4 2023, headline inflation will remain above Norges Bank’s 2.0% target this year. A weaker-than-expected krone is an upside risk.