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Norway: February retail sales – be prepared for a surprise

30 March at 10:00 CET Statistics Norway will publish retail sales figures (seasonally adjusted) for both January and February. The seasonally adjusted January figures were not published last time because Statistics Norway was changing the way it made the seasonal adjustment. This means the uncertainty is extraordinarily high this time and that one should be prepared for potentially large deviations from the consensus forecast of -0.5% m/m in February. There is no consensus forecast available for January retail sales.

We expect a sharp downward correction…

Nordea’s forecast for February retail sales is clearly on the weak side to the consensus forecast with -1.4% m/m. But this is given that our strong forecast for January is right with +1.8% m/m. We have based our January forecast on the seasonally adjusted figures for two subgroups of the consumption of goods indicator (which were published last time), namely “consumption of food and beverages and tobacco” and “consumption of other goods”. These two subgroups correspond to a large degree to what is included in the retail sales figures and both these groups increased by 1.7% m/m in January (seasonally adjusted). Hence, we expect a correction down after the very strong January retail sales. The monthly figures for card transactions also suggest weak retail sales in February.

…but the strong trend in retail sales remains

If we are right in our forecast, the average of January and February is still 1% higher than the average in Q4 2011. It means that the strong start of 2012 in retail sales continues despite the expected correction down in February. If the consensus forecast of -0.5% m/m is right, the trend in retail sales is very strong and probably much stronger than Norges Bank’s forecast, of course given that the January figures were as strong as we believe they were.

Important figures for Norges Bank

In Norges Bank’s latest Monetary Policy Report from 14 March the forecast for growth in private consumption was adjusted down substantially. This was an important factor behind the decision to cut rates at the March MPC meeting. The forecast is now 3% growth in 2012, adjusted down from previous forecast of 4 ½%. This reflects a radical change in Norges Bank’s view on the consumers – from believing in a drop in the household savings rate in 2012, it now forecasts an increase. Households’ real disposable income will increase strongly in 2012 (close to 5%) and given that the savings rate is already at high level, the potential for a much stronger consumption growth is very much in place. There is a clear upside risk to Norges Bank’s forecast for private consumption.

Tomorrow’s retail sales figures will show how strong Norwegian consumers started 2012. If we are right in our forecasts for January and February retail sales, the trend in retail sales is more or less in line with both our and Norges Bank’s view. But if the consensus forecast is right, the trend is much stronger and on the upside to Norges Bank’s forecast.
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