Experts believe more will soon notice oil downturn – Aftenbladet.no

Rising unemployment makes economists believe more interest rate cuts this fall, writes Aftenposten.

This week there have been several figures showing how oil slump hit the Norwegian economy and affecting increasingly more Norwegian lives:

Thursday came figures from NAV show that unemployment rose by 2,500 people. It is the biggest rise in unemployment in a single month in six years. Thursday came figures showing that industrial output falls. The decline was greatest in the oil services industry but also other industries know the downturn.

Read also: Unemployment continued to increase most in Rogaland

Oil downturn seems, however, still does not seem to dampen the desire to buy for most people. Retail sales rose 1 percent from May to June, helped by poor summer weather, according to Statistics Norway.

– yet we see little brake in the economy outside the oil related. But I think there is a risk that we may soon see it, says chief economist Harald Magnus Andreassen in Swedbank.

Can affect consumption

He points out that the Norwegian economy is not particularly well-balanced , with high house prices, high housing and high debt among households.

– When total economy goes the other way, are several areas at risk, as consumption and housing investment, he said.

After an increase in our oil price they last week fell again down towards the low levels of last winter. Friday afternoon was the oil price $ 52.6, exactly half as high as it was a year ago. Several oil analysts now believe that prices will remain at a low level longer than they expected just a few months ago.

Thina Saltvedt of Nordea downgraded this week its forecast for the average price for the second half from 67 to 64 dollars a barrel . For next year, she has revised down the average price of $ 75 to $ 72.

Belief in permanently lower prices

The oil economist Torbjorn Kjus in DNB Markets says he’s going to adjust their oil price estimates in a report next week, but would not say how much. He says reduced costs in the oil industry and increased production from OPEC countries, combined with lower demand from countries such as China forward, will dampen oil prices.

– We get another year with low prices before we get any meaningful improvement, said Kjus.

He does not think oil prices will come back to the last years’ high levels above 100 dollars a barrel.

Andreassen mean longer with lower oil prices increases the risk that oil downturn soon will frame broader .

– The housing market and consumption are obvious risk factors. Norwegian households have not so much money, and many have lived well in taking up more loans on the house. There is no good way to finance themselves over time, Andreassen says.

More rate cuts in store

Governor Øystein Olsen sat in June rate down 0.25 percentage points to 1 percent. It is the lowest level ever in Norway.

He also announced that there could be more rate cuts to fall, partly because unemployment rises. Yesterday’s unemployment figures from Nav, at 3.1 percent, was even weaker than Norges Bank assumed in June. Increased unemployment makes several economists now expect that Norges Bank will cut interest rates earlier than expected.

chief economist Harald Magnus Andreassen in Swedbank think interest rate cut could come as early as September, and does not preclude that there may be even more cuts.

– Unfortunately, I think it may be necessary to cut more, because there are signs that it does worse in the economy and that more unemployed, he said.

This is good news for people with high mortgages, but bad news for those who have money in the bank. The lowest mortgage rates are now around just under 2.5 percent, according to the Financial Portal.

Slightly lower wage

The growth of an average annual salary was 3.1 percent in 2014. SSB’s forecasts predict a further decline in wage growth, estimated at 2.8 percent in 2015.

According to SSB contributes the increase in unemployment that wage growth is weaker.

– Wage growth adversely affected by a low oil prices, because oil is our largest export industry, says chief economist at LO, Stein Reegård.

On the other hand strengthened ability to pay in other competitive industry, due to a stronger krone. In sum, we expect that wage growth for 2016 will be quite similar wage growth for the current year. SSB forecasts for 2016 show a slight increase in wage growth, to 3.0 percent.