Norway: Strong regional network

Norges Bank has published its Q1 regional network report (a business survey done in January). The survey points to a mainland growth in Q1 at 0.8 q/q. Norges Banks forecast from October is 0.8% q/q. The survey forecast for Q2 is 0.7% q/q compared to Norges Banks forecast at 0.8% q/q.

Credit growth in January was 6.9 % compared to 6.7% last month, consensus at 6.7% and Nordea at 6.8%.

The network indicates continued strong growth in the Norwegian economy. Growth in domestically oriented manufacturing and the export industry (no surprise) was weak, but with outlook improving in most other industries the overall picture was marginally stronger.

There are no big changes in the view on capacity utilization from Q4 to Q1 and no major changes in the other variables asked about (investment, employment prices etc.). A surprise is that the firms expect somewhat higher wage growth in 2012 than they did in Q4, slightly below 4%.

We do not think the credit growth figure had any impact on Norges Banks view. The regional network was broadly in line with Norges Bank’s view back in October. There is no reason to cut further from the domestic economy. Sooner the opposite strong domestic economy is counteracting the weak development in export industries. But of course a hike is not likely in the near future given the outlook for rates and growth abroad and the strong NOK.

Norges Bank will purchase foreign exchange equivalent to NOK 350 million per day for the Government Pension Fund Global in March compared to NOK 350 million per day in February.

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