Norway’s recovering economy grew faster than anticipated in the first part of 2017 and consumer confidence has hit a two-and-a-half year high, data showed on Tuesday, boosting the crown currency and making an interest rate cut less likely.
The turnaround follows a two-year slowdown brought on by the broad-based impact of a sharp reduction in investments by oil companies and mass layoffs as the price of crude – the Nordic country’s main export – fell.
Mainland GDP, which excludes the volatile oil and shipping sectors, rose by 0.6 percent in the first quarter from the previous three months, against a Reuters poll forecast of 0.5 percent. The fourth-quarter figure was raised to 0.4 percent from a preliminary 0.3 percent, Statistic Norway said.
“These numbers clearly show accelerating growth in the Norwegian economy,” said Nordea Markets chief analyst Erik Bruce.
“It is going a little better than the central bank had expected and the probability of a rate cut is clearly reduced after these numbers.”
Norges Bank last week left its key policy rate at 0.50 percent, forecasting that base borrowing costs would remain close to that level in coming years.
The growth numbers – which Statistic Norway said were slightly higher than the projected trend – boosted the crown, which traded at 9.3550 at 0724 GMT against 9.3840 just before the data was published.
The better growth picture was reflected in consumer confidence numbers that rose to a two-and-a-half year high in the second quarter.
“There is now a majority of optimists in all age groups of the population,” said Idar Kreutzer, chief executive of financial lobby group Finance Norway (FNO), in a statement.
The index, which FNO compiles mid-quarter, rose to a seasonally adjusted 11.1 points from an upwardly revised 7.3 points in the first quarter.
Despite the rising confidence, uncertainty lingered over consumers’ willingness to spend, particularly on big-ticket items, FNO said.
The consumer confidence reading hit a 24-year low in early 2016, dragged down by a plunge in the price of crude oil, the country’s main export.
The price of North Sea crude has almost doubled in the last 15 months but is still down by half from mid-2014 peak of around $115 per barrel.
“It’s still too early to conclude that the health of the economy is fully restored,” Kreutzer said. (Reuters)