Norway: The economy picks up pace in Q2 as investment flourishes
The economy expanded 0.3% in the second quarter of 2019 in quarter-on-quarter seasonally-adjusted terms, after flatlining in Q1 (previously reported: -0.1% quarter-on-quarter). The mainland economy—which excludes petroleum activities and related ocean transport—increased a solid 0.7% in Q2, up from the upwardly revised first quarter’s 0.5% expansion (previously reported: +0.3% quarter-on-quarter) but short of market analysts’ expectations of a 0.8% increase. In annual terms, the economy contracted 0.7% in Q2, down notably from the first quarter’s revised 2.3% rise (previously reported: +2.5% year-on-year), while the mainland economy grew 0.3% in Q2, down from 3.7% in Q1.
In quarter-on-quarter seasonally-adjusted terms, private consumption rose 0.3% in Q2, which was down from Q1’s 0.5% rise and likely the result of weaker wage growth, despite an acceleration in private sector credit growth and a dip in the unemployment rate. Moreover, government consumption was stable at Q1’s 1.0% increase in Q2. Meanwhile, gross fixed capital formation jumped 2.8%, contrasting the 2.3% contraction in Q1; the rebound was driven by a sharp recovery in capital spending in the extraction and transportation sectors.
On the external front, exports decreased 0.3% in Q2, largely due to a decline in exports of goods, contrasting the 2.0% increase in Q1. Import growth softened to 0.4% in Q2 from 3.3% in Q1. As a result, the external sector deducted 0.2 percentage points from economic growth in Q2, up from the 0.4 percentage points subtraction in Q1.
Going forward, healthy real wage gains and a tight labor market should support household spending for the remainder of 2019. Moreover, industrial production should be supported by increased investment into petroleum activities in recent months which bodes well for growth. Moving to 2020, the economy is expected to wane marginally at the onset of the year as a gloomier global growth backdrop and tighter monetary conditions weigh on the growth outlook.