The solid gains in retail sales and overall consumption of goods in January are reassuring, coming at the heels of softness over the second half of 2012. The first quarter of the year should thus see private consumption picking up which is more in line with the ongoing improvement in consumer confidence than what seems to have been a negative shift in labour markets. Following moderating momentum since last summer, Norwegian private consumption started the current quarter on a stronger note. First, real retail sales gained a much stronger-than-expected 1.0% on the month in January on the ex-autos measure, well ahead of consensus for a moderate 0.4% increase (SEB +0.5%). As the gain was not as strong as in early 2012, the year-on-year rate softened marginally to 2.5% in January (on the seasonally adjust6ed index). Second, the monthly indicator measuring overall consumption of goods was almost as strong by lifting 0.9% from December while the year-on-year rate picked up markedly from 2.5% at end-2012 to an exaggerated 3.4% in January.
Solid growth in January is reassuring considering that private consumption of goods as measured in the national accounts slipped over the second half of 2012. While short-tem momentum is soft, the level of goods consumption in January was 1.0% above the average in Q4, suggesting that the current quarter will see a solid recovery even if some correction might be looming in the near term.
The moderation in overall private consumption over the balance of 2012 seemingly mirrored a shift in the labour markets as employment according to the Labour Force Survey has stalled since mid-2012. It should be noted, though, that the national accounts showed ongoing employment growth over this period (admittedly at a slower pace). Meanwhile, growth in households’ income remained supportive: although real (i.e. inflation-adjusted) disposable income dipped slightly between the third and fourth quarter of 2012, it gained a very solid 4.0% for the full year and thus more than a full percentage more than consumption (as was the case in 2011). In addition, the quarterly survey of consumer confidence has continued to trend higher and reached a two-year high in Q1 to be somewhat above the long-term norm, which on the face of it should be consistent with above-trend consumption growth as well.
SEB