DNB Markets Wednesday outside his semiannual economic report “Economic Outlook”.
– Forward likely effects of lower oil investments decline and real wage growth picking up. High inflation and house prices indicates that Norges Bank allows interest rates remain steady, despite a more expansionary monetary policy needs and higher premiums in money markets, writes brokerage.
Norges Bank’s key rate is at 0.5 percent, and next decision will be announced on 23 September.
the estimates for growth in mainland GDP is kept unchanged compared with May report.
that brokerage stuck at 0.8 percent growth in year, 1.4 percent next year and 1.9 percent in 2018.
– oil investments turn in 2018
According to DNB Markets petroleum investment will still weigh on growth, but no more than that the projections kept unchanged also here.
that oil investments, measured in volume, increasingly expected to fall 15 percent from 2015 to 2016, and another 10 percent in 2017. A turning point comes in 2018, when investments are expected to increasing 5.0 percent, while in 2019 growth is estimated at 10.0 percent. The brokerage house based on the underlying that giant project Johan Castberg will be carried out.
In private consumption waiting DNB Markets established a 2016 growth of 1.3 percent.
– Furthermore, we envisage that inflation decreases and that the real income growth picks up. We believe the rise in saving largely related to changes in pension plans and household previous debts increase. This means that the savings rate will remain high in the future.
– It thus appears that growth in private consumption is the lowest in years. We assume that the increases to just under three percent in 2019, it says.
Jacks up inflation
The estimates for inflation is still revised up from May and brokerage now expects core inflation 3.2 percent in 2016, compared with 2.7 percent at the previous crossroads.
2017 inflation is jacked up from 1.4 to 2.2 percent and the 2018 inflation from 1.0 to 1.4 percent . DNB’s macro team has stressed wage growth has fallen significantly in recent years, but that this is probably going up slightly next year.
Unemployment (SSB labor force survey – LFS) is expected to 4.8 percent this year, rising to 4.9 percent in 2017 and 5.0 percent in 2018. But then think DNB Markets also the peak has been reached, and predicts 4.9 percent for 2019.
– Significant uncertainty
the brokerage underlines the uncertainty surrounding such estimates is significant.
– If the wage or exchange rate developments will be different than anticipated, inflation will also be another. Although we would meet on salaries and the exchange rate, there are several other factors that can affect inflation, it can be seen by the report.
For example, the low economic growth, with higher unemployment and weaker income growth, according to DNB Markets provide greater competition puts pressure on margins and hence push prices down.
– another example is that the depreciation of the krone in recent years has been great and that the crown has remained weaker than many had expected. It is conceivable that the pass-through to prices are not depleted as quickly as anticipated. There are risks on both sides of the projections and we regard it as equally divided, it says.
Viewing stronger krone
DNB Markets assume that the krone will strengthen throughout the coming year, for example, a EURNOK at 8.90 in November this year, 8.80 in February next year and 8.70 in August 2017. EURNOK stands today in 9.27.
– A crown strengthening will contribute to lower import prices and indirectly to lower domestic core inflation. The imported core inflation can thus be negative from the end of 2017. Nevertheless, it is worth noting that the decline in import prices is not as strong as the strengthening of the crown would suggest, writes brokerage.
The full report here.
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