MNI POLICY: Norges Bank Report Shows Solid Output Growth

--Q4 Regional Network Report Sees Growth Maintained; Supports Q1 Hike Case

By David Robinson, Jamie Satchi and Jai Lakhani

     LONDON (MNI) - Norway saw continued solid growth in the fourth quarter and

the pace of growth was expected to pick up further in the first half of next

year, the Norges Bank's Regional Network Report found. 

     The central bank's report will bolster expectations that the next rate hike

is on the way, with the bank's executive board having previously stated it was

most likely in the first quarter 2019.

     The following are key points in the report:

     --The output expectations measure for the next six months rose to 1.49 from

1.46 in the previous survey, and for the past three months climbed to 1.38 from

1.35. The bank's regional contacts revealed that most sectors expected higher

growth in the first half of 2019.

     --The Norwegian economy seems to be running at full capacity. Capacity

constraints were reported to be dampening output growth with demand having

risen. These pressure were highest in construction and in the oil service

sector. 

     --Growth in the number employed has picked up modestly since August.

However, enterprises expect somewhat lower growth over the next three months.

Retail trade showed signs of employment growth slowing over the past year with

contacts now reporting slight declines in the  number of employees. However, the

oil service is not expected to see much of a slowdown with oil service contacts

expecting rising growth ahead. 

     --Background on Mon  Pol

     In Sep, the Executive Board left the repo rate unchanged at 0.75 per cent,

assessing that the economic upturn was continuing and that capacity utilisation

was close to a normal level. Underlying inflation was close to the 2% target.

The key policy rate was raised from 0.50% to 0.75% in September, and the

Executive Board's assessment was that the key policy rate would most likely be

increased further in 2019 Q1.

     The outlook and balance of risks imply a gradual increase in the key policy

rate. Economic growth has been a little lower and inflation somewhat higher than

projected, but the outlook and the balance of risks do not appear to have

changed substantially since the September Report.

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

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com