The Norwegian economy is projected to undergo a gradual softening, with output growth expected to slow to 0.1% in the fourth quarter of 2023, down from an anticipated 0.3% gain in the third quarter, according to recent findings from a regional network survey conducted by Norges Bank. The survey, released on Thursday, attributes this slowdown to a decrease in construction activity and a dip in household demand.
Despite an unexpected inflation slowdown in August that had investors anticipating fewer key rate hikes, the survey findings support the possibility of another quarter-point increase by policymakers in the upcoming rate decision. If implemented, this would push the interest rate to 4.25%.
The survey results are the last major data set before Norges Bank's forthcoming rate decision and indicate that while one more rate hike may be imminent, any subsequent reductions are likely to be delayed. This expectation persists despite the inflation slowdown observed last month.
Furthermore, the job market continues to expand, albeit at a slower pace than previously anticipated. Wage growth is also decreasing at a less rapid rate than earlier projections had suggested. Despite these factors, the overall outlook for the Norwegian economy points towards a soft landing as per the survey's findings.
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