Norway: Economic activity shrinks at a softer pace in February
Economic output decreased 0.7% over the prior month in February in seasonally-adjusted terms, reducing slightly from the 0.9% drop in January. Meanwhile, the economy grew 0.6% in the rolling quarter of December–February relative to the previous quarter (September–November), thus matching the equivalent reading from November–January.
Mainland GDP—which excludes hydrocarbon extraction and related transport—decreased 0.5% in February over the previous month, moderating from the 0.8% fall clocked in January. In the rolling quarter of December–February, the mainland economy expanded 0.4% from the previous rolling quarter, down from the 0.9% growth recorded in November–January.
The improvement in February was broad-based. Domestically, private consumption shrank 0.2%, softening from January’s 2.7% contraction, while government spending also fell at a milder rate (February: -0.2% mom; January: -1.5% mom). Meanwhile, fixed investment swung back into expansion (February: +1.1% mom; January: -2.5% mom), further supporting the overall reading. Externally, exports grew 0.1% in February, contrasting the 3.6% drop in January, while imports flatlined in February after the 1.8% fall in the month prior.
The overall reading came amid a continuation of tighter restrictions instigated towards the end of January in response to elevated daily Covid-19 infections. Looking ahead, spiking infection rates throughout March will have likely weighed on output in the remainder of Q1, although the vaccine campaign that began in February bodes well for an uptick in activity later in the year.
Regarding the outlook, James Watson, senior economist at Oxford Economics, commented:
“As with many European economies, Norway faces a weak growth outlook in early 2021. […] Yet we expect this setback for growth to be temporary. As the supply of vaccines improves, Norwegian authorities expect most of the adult population will be inoculated by mid-summer, which will allow lockdown measures to be rolled back. Non-service portions of the economy appear to be in much better shape already [and] as the services sector joins the recovery, the economy should accelerate sharply from Q2 onwards, allowing mainland GDP to recover fully from the pandemic by around mid-year.”