Norway: Economic growth slows in August
October 8, 2020
Economic output grew 0.7% over the prior month in August in seasonally-adjusted terms, slowing from the 1.3% expansion in July but still marking the fourth consecutive month of growth. Moreover, the economy grew 4.2% in the rolling quarter of June–August relative to the previous quarter (March–May), contrasting the 0.3% contraction clocked in May–July.
Mainland GDP—which excludes hydrocarbon extraction and related transport—increased 0.6% in August over the previous month, after rising 1.3% in July. In the rolling quarter of June–August, the mainland economy expanded 4.8% from the previous rolling quarter, returning to growth after shrinking 0.4% in May–July.
The slowdown in output in August was spearhead by a mild contraction in private consumption, which shrank 0.6% month-on-month (mom) after expanding 3.1% in July. Moreover, fixed investment fell 1.3% in the month, reversing direction from July’s 2.7% increase. However, government spending continued to grow, albeit at a reduced pace (August: +1.1% mom; July: +1.4% mom). Externally, exports dropped 0.9% in August, contrasting the 5.8% jump recorded in July, while imports growth slowed to 0.5% in August, moderating from July’s 5.1% rise.
August’s reading reflected some seasonal characteristics, with vacations usually taken during the month—thus affecting activity in some industries—and the consumption of food, clothing and sporting goods normally inflates in June–July, thus offering a high base effect on a monthly basis. However, low oil and gas prices are acting as an impediment to energy-sector investment this year, with the weak demand picture for fossil fuels clouding the external sector outlook markedly.
Looking ahead, Neal Kilbane, senior economist at Oxford Economics, commented:
“We expect the mainland economy to expand by 4.2% in Q3 and by 1.3% in Q4, and regain its pre-crisis size by early 2022. However, risks remain elevated and rising virus infection rates in Norway and across Europe could see a reintroduction of restrictions that stunts the recovery.”
Author: Stephen Vogado, Economist