Expectations Survey: Wage Growth Expectations Rise In Line With Norges Bank Guidance

The Norges Bank’s Q2 expectations survey indicated a fall in short-term inflation expectations, though nominal wage growth expectations were revised higher, in line with the recent union wage settlements. As a result, real wage expectations were revised higher in Q2, which should provide some support to household consumption going forward.

• 1-year ahead inflation expectations amongst economists, social partners and business leaders were revised lower in Q2, though household expectations were revised a tenth higher to 2.8% Y/Y.
• Business leaders and households saw the largest increase in annual wage growth expectations relative to Q1, with the former rising to 5.1% (vs 4.7% prior) and the latter to 3.7% (vs 3.3% prior). Economists also revised wage growth expectations higher, though social partners’ 5.0% expectation was a tenth below the Q1 estimate.
• Overall, the increase in wage growth expectations is consistent with the Norges Bank’s commentary at the May monetary policy meeting, where upside risks were highlighted to the March MPR’s 4.9% Y/Y projection.
• There was an increase in the proportion of business leaders expecting profitability to decrease in Q2, to 33.7% (vs 31.1% in Q1).