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Norway's growth weighed down by oil, consumers resilient
[OSLO] Norway's growth prospects are taking a hit from lower oil prices and falling energy investments but consumer confidence is holding up and household spending was better than expected in October, separate data showed on Friday.
Output growth over the past three months was weaker than projected in August and growth prospects have also slightly weakened, with lower activity in the offshore sector being the main drag, the central bank said in a survey of companies that will be key to its December 11 rate decision.
But retail sales grew by 0.6 per cent on the month in October, data showed, just ahead of expectations for 0.5 per cent, while the monthly consumer sentiment index rose to -2.5 points in November from -3.2 points in October.
Unemployment at 2.6 per cent in November also came below expectations for a steady rate at 2.7 per cent, keeping Norway's jobless rate one of the lowest in the developed world. "In sum, these data are marginally weaker than the central bank's forecasts," Nordea economist Erik Bruce said. "The bank's network survey showed slightly lower growth and, though retail rose slightly, the trend is still weaker than the bank forecast." Around a fifth of Norway's economy and half of its exports are generated by the oil sector and the 35 per cent fall in crude oil prices since June has weighed on the economy.
But Norway's trade-weighted currency has also fallen by more than 8 per cent since early June, improving the prospects of exporters and industries outside the offshore sector. "Weaker growth ahead was still envisaged by manufacturing, and the oil supplier industry expected a further decline in output over the next 6 months," the central bank said in its survey of 324 companies. "Both services and retail trade expected approximately unchanged growth ahead, but prospects were lower than in the previous survey (in August)," it added.
The bank is expected to keep rates on hold at its Dec 11 meeting and analysts have said it will probably delay a rate hike planned for 2016 as falling oil prices and lower energy sector investment dim Norway's outlook.