According to a regional network study conducted by Norges Bank, Norway’s economy is expected to experience a gradual softening. The study reveals that output growth in the fourth quarter of 2023 is expected to be 0.3% higher than the third quarter, but is then projected to slow down to 0.1%. The economic slowdown is mainly attributed to a decline in construction activity and a decrease in household demand.
Despite a recent unexpected slowdown in inflation, investors were anticipating a reduction in key rate hikes. However, the survey results suggest that policymakers may be willing to give up another quarter of a percentage point on future interest rate decisions, indicating a possibility of an interest rate hike that would raise rates to 4.25%. These survey results are crucial as they are the last major set of data before Norges Bank’s future rate decisions. While another rate hike may be imminent, any subsequent rate cuts are likely to be delayed.
The survey also indicates that, despite the slowdown in inflation, the job market in Norway is still expanding, although at a slower pace than previously anticipated. Wage growth is also declining at a slower rate than predicted. Overall, the survey results suggest a soft landing for the Norwegian economy.
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