• Unemployment increased by 1700 persons in May
• Clear upward trend which argues for a lower rate path
• Strong credit growth, but not that strong impact on rates
After a sideways to slight downward trend in 2012 registered unemployment (including those on labour market measures) has now increased by 4500 persons since the start of 2013. The rise is still moderate compared to the sharp rise in LFS unemployment. LFS unemployment has increased by 19 000 person the last year.
There is no doubt any more, the labour market is weakening. Most likely labour immigration continues to rise strongly while growth in employment has slowed. That registered unemployment increases most in construction could indicate this. The slowdown in starts of commercial buildings has probably lowered demand for labour and this has so far at least not dampened immigration.
Registered unemployment is still not significantly above Norges Bank’s forecast. Still with the upward trend and with the much higher than forecasted LFS unemployment Norges Bank will view the labour market as less tight than expected. All else equal it argues for a lower rate path, but with NOK on the weak side to forecast it will probably not be enough to trigger a cut in June.
Today’s April credit growth figures were seemingly very strong with high growth in household credit and an upward revision to the March figure. In the two months on average household credit growth was 7.6% clearly stronger than the average level seen the last years. However the figures were high due to base effects. We expect that base effects will pull down the y/y growth again in May to 7.3-7.5%. We doubt Norges Bank’s will give too much weight to two months with above trend growth in household credit.
On the corporate side credit growth increased to 4.2% from 3.9% which was more in line with what we had expected. The underlying trend is rather weak, probably due to weak business investment activity.
In sum we view today’s figures as on the weak side to Norges Bank.
Details on April credit growth :
• Total credit growth 6.5% y/y, up from a revised 6.2% (from 6.1%)
• Household credit growth 7.7% y/y, up from a revised 7.4% (from 7.2%)
• Corporate credit growth 4.2% y/y, up from a revised 3.9% (from 3.8%)
Details on May registered unemployment: Registered unemployment (seasonally adjusted and including those on labour market measures) was 86 315 persons in May compared to 84 601 last month. Nordea’s forecast was 84 500 while consensus was 84 750. The unadjusted unemployment rate (excluding those on labour market measures) was 2.5% while consensus and our forecast were 2.4%.
Nordea