Norway: Growth hits multi-decade high in Q3 amid rebound in domestic demand
November 17, 2020
GDP rebounded strongly in the third quarter, growing 4.6% on a seasonally-adjusted quarter-on-quarter basis, according to data released by Statistics Norway on 17 November. The Q3 reading contrasted the 4.7% contraction recorded in the second quarter and marked the fastest rate of expansion since at least 1990.
The upturn was spearheaded by a broad-based improvement in domestic demand. Private consumption increased 9.5% in the third quarter, which contrasted the second quarter's 10.8% contraction and reflected the gradual easing of pandemic-induced restrictions. Meanwhile, government consumption grew at the fastest pace in over 15 years, expanding 3.0% (Q2: -2.0% s.a. qoq), and fixed investment dropped at a milder rate of 1.1% in Q3, compared to the 1.8% contraction in the previous quarter.
On the external front, exports of goods and services rebounded, growing 4.7% in seasonally-adjusted quarter-on-quarter terms in the third quarter, which marked the best reading since Q4 2019 (Q2: -7.8% s.a. qoq). In addition, imports of goods and services bounced back strongly, growing 10.3% in Q3 (Q2: -17.5% s.a. qoq) as domestic demand recovered. As such, the external sector detracted 1.1 percentage points from the overall reading in Q3, having contributed positively in the prior quarter (Q2: +2.6 percentage points).
The mainland economy—which excludes petroleum activities and related ocean transport—grew 5.2% s.a. qoq in Q3, contrasting the 6.0% contraction in Q2. Meanwhile, on an annual basis, total GDP fell 0.2% in Q3, up from the previous period's 4.0% decrease.
Looking ahead, recent data points to a slowdown in the recovery, as household consumption growth decelerates amid a loose labor market. Furthermore, the reimposition of restrictions in a bid to dampen a spiking national infection rate bodes ill for domestic activity, while a continuation of slack demand for oil from major international markets is a key risk to the external sector.
Regarding the outlook, Christian Schnittker, economist at Goldman Sachs, commented:
“A vaccine boost in 2021H2, a strong global backdrop, and easy financial conditions should support a swift recovery in 2021 and beyond. The key will be for monetary and fiscal policy to remain supportive of incomes and cash flows, policies that have proven to be successful earlier in the year.”
Author: Stephen Vogado, Economist