Norway: Economic activity deteriorates in January
Economic output decreased 0.3% over the prior month in January in seasonally-adjusted terms, contrasting the 1.1% rise in December. Meanwhile, the economy grew 0.6% in the rolling quarter of November–January relative to the previous quarter (August–October), thus matching the equivalent reading from October–December.
Mainland GDP—which excludes hydrocarbon extraction and related transport—decreased 0.2% in January over the previous month, contrasting the 0.8% rise clocked in December. In the rolling quarter of November–January, the mainland economy expanded 0.8% from the previous rolling quarter, down from the 1.8% growth recorded in October–December.
The downturn in output in January was broad-based. Domestically, private consumption shrank 2.3%, deteriorating from December’s 0.4% contraction. Meanwhile, both fixed investment (January: -2.6% mom; December: +2.1% mom) and government spending (January: -1.4% mom; December: +1.0% mom) swung into contraction, weighing further on the overall reading. Externally, exports shrank 3.5% in January, contrasting the 5.0% rise in December, while imports dropped a more moderate 2.6% from a 5.8% fall in the month prior.
January’s overall reading reflected a tightening of restrictions in both domestic and key international economies, as a result of spiking Covid-19 infection rates at home and in the U.S. and EU. Increased domestic measures drove a further fall in services consumption, mainly due to the closure of shops in the Oslo region, which weighed on household spending in the month. Looking forward, rising infection rates throughout February and into March will have likely weighed on output in the remainder of Q1, although the vaccine campaign that began in January bodes well for an uptick in activity later in the year.
Regarding the outlook, Øystein Børsum and Marlene Skjellet Granerud, economists at Swedbank, commented:
“We continue to believe that the economy will rebound forcefully in the months ahead, as a larger share of the population will be vaccinated, and restrictions lifted. We think this will lead to a first rate hike in the second half of this year.”