A new consumer survey from Finance Norway shows that confidence in the Norwegian economy is at an all-time low and that EU consumers are more optimistic than Norwegians for the third quarter in a row.
The main indicator in the consumer survey has not been lower since Norway’s banking and housing crisis of 1992, Yahoo reported.
The only other time consumer confidence approached the low levels seen now was during the wake of the financial crisis, when consumer confidence was at -8.5 in the fourth quarter of 2008 and -8.7 in the first quarter of 2009. Still, neither of those come close to the -16.2 recorded in January 2016.
The indicator expresses the difference between optimistic and pessimistic responses to five standard questions in the survey.
Despite the numbers, Finance Norway CEO Idar Kreutzer said it’s important not to exaggerate the fear of a downturn in the Norwegian economy and concerns about rising unemployment.
“Most people have a secure job and won’t be affected by the problems faced by parts of the Norwegian industry. If falling confidence and increased unemployment make individual households overreact by increasing their savings and tightening consumption it can affect sectors of the Norwegian industry,” Kreutzer said.
The biggest thing to drag down the barometer in January was Norwegians’ assessment of how the country’s economy has performed over the past year. A full 70% said that it has been worse than expected while just 4.9% thought it had beaten expectations. That gives an index figure of -63.6%. The question of whether consumers expected the economy to improve over the coming year resulted in an index score of -49.5.
“We now see that the low confidence in the country’s economy is influencing people’s confidence in their own situation. We can see that more people are preparing for hard times by postponing major purchases and spending less on vehicles and travel,” Kreutzer said.
One question will be whether Norway will at some point follow Sweden and Denmark, whose central banks have cut interest rates into negative territory in an effort to boost growth.
The Prime Minister Erna Solberg believes there is still room for action. “There’s still room for stimulating the economy with lower interest rates,” she said in the Reuters interview, while adding that it’s the central bank’s job to independently set monetary policy.
She did not say whether the government would introduce more stimulus measures in the revised 2016 fiscal budget in May or its 2017 election year spending plan in October.
“With the current outlook there is no reason to stimulate the economy any less than we do now. But these are things we must ultimately decide when the budgets are due,” Solberg said.
