Norway’s economy kept momentum in the first quarter, helped by a rise in exports as consumer spending stalled.
Mainland economic growth, which excludes oil and shipping, expanded 0.6% in first quarter, beating the 0.5% estimate in a Bloomberg survey of 14 economists. The central bank had forecast growth of 0.7%. Fourth quarter growth was revised higher to 0.7%.
Surging oil prices is adding to optimism in Norway, western Europe’s biggest crude producer. The economy is now in full recovery mode after enduring the worst oil crisis in a generation. The central bank has flagged it will start tightening after the summer, even as inflation remains far below its 2% target.
But consumer spending stalled in the quarter, while public spending increased 0.6%, according to Statistics Norway. Exports rose 0.4%, but investment fell 5.1%. The oil industry and shipping output rose 1% in the period. Employment grew 0.5% in the quarter, the same pace as at the end of 2017.
Erik Bruce, a senior economist at Nordea Bank AB in Oslo, said the slowdown in demand is likely temporary as strong employment growth will boost consumption and investment will pick up again. Oil investments are also likely to grow and the weak krone will support exports, he said.
“Today’s figure removed the impression that figures for growth and capacity utilization is on the weak side to Norges Bank and made us more certain about the September hike,” he said.
Norway’s central bank has indicated it will raise interest rates from a record low of 0.5% “after the summer.”
The krone climbed 0.2% against the euro in Oslo.
Norway will spend less money than planned from its $1 trillion sovereign wealth fund in 2018 as growth accelerates and state income rises, the government said in its mid-year budget revision on Tuesday, Reuters reported.
Norway’s structural non-oil deficit, a key measure of public spending, is now estimated at 225.5 billion Norwegian crowns ($28.10 billion), down from 231.1 billion crowns seen last October.
The revised plan corresponds to an estimated 2.7% of the oil fund’s value, down from 2.9% in the original budget plan and below the 3% that Norway aims to spend in a year of average growth.
“The revision should be read in the light of a substantial rise in the fund’s market value by the end of last year,” the finance ministry said in a statement.
