Norway’s economy contracted for the first time in seven months, led by weaker construction and services linked to fossil fuel extraction, adding evidence of fallout from higher prices and credit costs.
(Bloomberg) — Norway’s economy contracted for the first time in seven months, led by weaker construction and services linked to fossil fuel extraction, adding evidence of fallout from higher prices and credit costs.
Mainland gross domestic product, which adjusts for Norway’s offshore industry, shrank 0.2% in February from the previous month — the first decline since July — following a revised increase of 0.1% at the start of the year, according to data from the statistics office on Wednesday. That was in line with the central bank’s projections while analysts had expected no change, according to a median forecast in a Bloomberg survey.
The krone, which on Tuesday hit new three-year lows versus the euro, weakened briefly following the report, firming later to trade at 11.5254 per euro at 9:28 a.m. in Oslo.
The fossil-fuel rich Nordic economy has so far weathered a surge in inflation and borrowing costs better than its regional peers, helped by more resilient labor and housing markets than the central bank had expected. While growth has been slowing, it still remains at 0.3% on a rolling three-month basis for the December-February period, the office said.
“As the mainland GDP has developed more or less in line with Norges Bank’s forecast and yesterday’s core inflation was spot on Norges Bank’s forecast, Norges Bank will likely hike the policy rate in May as guided for at the March meeting,” Kyrre Aamdal, senior economist at DNB Bank ASA, said in a note to clients.
Read More: Norway Inflation Quicker Than Expected, Backing Rate Outlook
Policy makers, struggling to rein in inflation that’s still close to three-decade highs, last month raised their outlook for benchmark rate increases by half a point to a peak of 3.6%. They also upgraded mainland growth forecasts for this year and next to 1.1% and 0.5%, respectively.
–With assistance from Ainhoa Goyeneche.
(Updates with krone in third paragraph, analyst comment in fifth)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.