Mainland growth will slow significantly to 0.1% q/q in Q3. The weak Q3 growth is no signal of a general slowdown, but a correction after the surprisingly strong Q2-figures. Excluding the volatile electricity production growth will be close to the average growth since the start of 2013. Our forecast is marginally lower than Norges Bank’s forecast, but not enough to have any impact on its view on growth and capacity utilization.
At Thursday 20 November (10:00) we will receive Q3 mainland GDP. We forecast growth at 0.1% q/q while consensus is 0.2 % q/q. Such a weak figure might be read by some that the drop in oil prices and the expected drop in oil investments are hitting Norway. Nothing could be more misleading. Manufacturing production, which is the first sector to be hit by lower oil investments, will probably grow by more than 1% q/q in Q3.
The weak Q3 growth is to a large extend a correction after the strong Q2 growth at 1.2% q/q. Electricity production will drop by close to 10%, after a similar rise in Q2. Excluding the volatile electricity production growth in Q3 will be 0.5% q/q, in line with the average since late 2012. A drop in the retail sector following the weak retail sales during the summer is the only part of our forecast we would characterise as weak.
Norges Bank’s forecast for mainland growth in Q3 is also weak at 0.2% q/q, but writes in the last MPR that the weakness is temporary and a correction after the strong Q2. Our forecast is marginally lower than Norges Bank’s forecast, but not enough to have any impact on its view on growth and capacity utilization.
We assume the market is prepared for a weak figure and that the reaction will be muted if we are right. If we however end up at zero or negative growth it will immediately be taken as sign that the Norwegian economy is finally faltering and the market reaction will be strong. We however have to take a closer look before we reach such a conclusion. Even with growth at say -0.1 % q/q the average in Q2 and Q3 will be rather good.
Nordea