MNI 5 Things: Norges Bank Report Notes Growth Softer

By David Robinson

     LONDON (MNI) - The Norges Bank released its Regional Network contacts

report Tuesday, a key report on economic activity and the outlook for economic

growth. 

     -Economic growth in Norway appears to have decelerated. The report said

that there was "slightly weaker output growth than in January" and business

contacts expect moderate output growth over the next six months.

     -While the growth outlook is subdued, the labour market is continuing to

tighten. The report said that "there has been solid growth in employment over

the past three months" with jobs growth in every sector and solid further growth

expected over the next three months.

     -One of the causes of slower growth was "capacity constraints," which are

not the something open to a quick fix. In all 34 per cent of respondents said

that they were working at full capacity, up from 32% in January, with 17% citing

labour supply as a constraint on growth. The flipside of the downward pressure

on growth of capacity constraints is that recruitment difficulties should put

upward pressure on marginal pay rates.

     Business contacts said that they were planning for a marked rise in the

level of investment over the next 12 months, with service industry contacts

reporting record high investment increases.

     -Norges Bank's business contacts anticipated annual wage growth of 2.8% in

2018, up from 2.7% in the January survey. They also expected a modest rise in

selling prices over the next 12 months.

     -The report adds to the complexity of the policy decision for the Norges

Bank, which had previously signalled an Autumn rate hike and which will make its

next announcement on June 21. On the dovish side, the expected moderate output

growth follows following soft inflation data. 

     On the hawkish side, the strong employment growth and firmer earnings

outlook are supportive of the case for tightening, and business contacts do

expect prices to rise, albeit modestly. Overall, the report looks solid enough

not to disturb rate expectations.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: MAUDR$,MAUDS$,MMUFE$,M$U$$$]