Norway Economic Forecast

The economy should have posted a modest quarter-on-quarter expansion in the third quarter, improving from the second quarter’s flat result. July’s total GDP growth of 0.3% month on month outweighed August’s 0.2% monthly fall. August’s result was dragged down by an unfavorable base effect in private spending. Less positively, the external sector’s performance likely weakened as the downturn in goods and services exports deepened in July–August from Q2. In Q4, sequential growth should be waning. Both headline and core inflation accelerated in October, likely weighing on private spending. Meanwhile, home prices rose month on month in October, contrasting Norges Bank’s projections of another decline, suggesting another rate hike in the horizon; this would further contribute to a domestic demand slowdown.

In October, headline and core inflation rose, the former to 4.0% (September: 3.3%)—undershooting Norges Bank’s expectations—and the latter to 6.0% (September: 5.7%)—in line with the Bank’s projection. In 2024, inflation will average below 2023’s level on the delayed effects of interest rate hikes this year and a high base effect but remain above Norges Bank’s 2.0% target.