Norway: Economy decelerates and records flat growth in Q2
August 31, 2016
Following the 1.0% quarter-on-quarter expansion in the first quarter, Norway’s economy slowed down and recorded a flat reading in Q2. The discouraging figure was below the 0.1% expansion expected by market analysts. In year-on-year terms, however, Norway’s economy grew a healthy 2.5% in Q2, which was an acceleration from the 0.6% annual growth seen in Q1.
While total GDP saw no quarterly expansion, Mainland GDP—which comprises all domestic production activity except for the extraction of crude oil and natural gas (including related services) and pipeline and ocean transport—managed to record a 0.4% expansion over the previous quarter (Q1: +0.3% quarter-on-quarter), which was above analysts’ forecast of a 0.3% increase. The strong annual expansion rate seen for total GDP was reflected in Mainland GDP growth, which rebounded from a contraction in the first quarter. (Q2: +2.0% yoy, Q1: -0.5% yoy)
Total consumption growth in Norway slowed down marginally in Q2 (Q1:+0.6% qoq; Q2: +0.5% qoq) as private and government consumption kept steady expansion rates. In both the first and second quarters, private consumption grew 0.5% while government consumption grew 0.6%. Fixed investment growth rebounded from contractionary to expansionary territory in the second quarter, though it only recorded a meager 0.1% increase (Q1: -1.6%). In particular, investment in petroleum exploration and production drilling contracted, while investment in platforms improved. In contrast, total investment, which includes inventory spending, dropped 2.5% over the previous quarter, contrasting the 5.6% increase in Q1. Statistics Norway’s forward-looking investment intentions survey suggests that total investment will continue to decline in 2016, dragged down by contractions in extraction- and pipeline-related activities.
The external sector returned to providing a positive contribution in Q2, after dragging on growth in Q1. The contraction in exports softened (Q1: -2.7% qoq; Q2: -0.3% qoq) and imports deteriorated from a 0.9% contraction in Q1 to a 1.7% drop in Q2. Exports of traditional goods, such as refined oil products, recorded another decline in Q2, while exports of services rebounded from a drop in Q1. As a result, the external sector’s contribution to growth improved from negative 0.8 percentage points in Q1 to positive 0.4 percentage points in Q2.