Norwegian economy in 2022: High growth, high prices
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The reopening and removal of infection control measures early in 2022 led to increased service consumption, normal operations in the industries that were restricted by the pandemic and a large workload for businesses.
The service industries that were affected by the pandemic contributed the most to GDP measured in constant prices.
Most of the recovery after the pandemic was completed in the autumn of 2021, but since activity in parts of the economy was limited in 2021, there was a significant positive overhang into 2022.
"During the pandemic, there were great uncertainties about which long-term consequences the lockdown measures could have. The economy proved to be more resilient than most expected, and instead of long-term low activity and waves of bankruptcies and exclusions from the labour market, employment increased quickly and economic activity recovered," says Head of National Accounts, PÃ¥l Sletten.
The labour market has been strong in 2022, but growth in the number of jobs slowed towards the end of the year. Employment increased quickly after the pandemic and has grown since the second half of 2021. Labour participation has been high, and unemployment is low.
Although many prices increased in 2022, the increase in the price of oil and gas overshadowed all other prices in 2022. Measured in current prices, total GDP increased a solid 32.2 per cent, corresponding to 1 358 billion NOK, which is the highest measured growth in the national accounts.
Although there were broad price increases in 2022, it was mainly the rise in the price of oil and gas that contributed to the enormous growth in nominal GDP. Since these are exported goods, Norway's trade balance is estimated at 1 579 billion NOK in 2022.
The large increase in electricity and petrol prices has given business increased production costs, which has been a significant reason for the high prices in 2022. It seems that businesses have largely managed to transfer the increase in costs to the retail prices, so that the operating results have remained good.
This has led to a significant increase in consumer prices, which has reduced households' purchasing power. It is likely that the financial support households received during the pandemic has helped to keep demand up.
"Despite increased prices and interest rate hikes, household consumption increased significantly in 2022. Households have saved a lot during the pandemic, so they have been able to use their savings in 2022," says Sletten.
In December, GDP for Mainland Norway increased 0.4 per cent, and 0.8 per cent in the quarter. Wholesale and retail trade contributed most to the growth, and this is due to a sharp rise in car purchases.
The imports of motor vehicles sometimes come in large batches. The purchases may have taken place a while ago. But they are registered in the national accounts only when the shipments arrive in Norway.
The large increase in car purchases at the end of the year, especially in December, is mainly due to an increase in car taxes from January 2023, but also production constraints and delays earlier in the year.
The increase in wholesale and retail trade also leads to higher tax revenue, which helps to raise GDP.
Excluding wholesale and retail trade and net product taxes, GDP for Mainland Norway increased 0.6 per cent. Increased car purchases also led to an increase of 12.8 per cent in household consumption of goods in December.
Excluding car purchases, however, goods consumption fell 1.5 per cent in December.
The service industries, including dwelling services, increased 1.4 per cent in the fourth quarter. Increased activity in wholesale and retail trade contributed most to the growth as a result of an enormous growth in car purchases. Professional, scientific and technical activities as well as the sale and real estate activities also contributed to the growth.
Other goods production, which includes the primary industries, electricity production and construction, fell 0.3 per cent in the fourth quarter. The decline is mainly due to a decrease in the activity in traditional fishing. Increased electricity production helped dampen the decline somewhat.
These are resource industries that are affected by non-cyclical conditions that can vary from year to year. At the same time, the industries are more volatile than other industries. Increased activity in construction as well as aquaculture also helped to moderate the decline.
Activity in manufacturing and mining fell 0.4 per cent from the third to the fourth quarter. It was particularly the production of computers and electrical products, furniture and other industrial production, and chemical raw materials that contributed to the decline.
The manufacturing industry has been characterized by a scarcity of labour and logistics challenges on the world market in 2021 and 2022, but the scarcity of inputs and labour was mitigated during 2022.
Overall, household consumption increased a solid 11.4 per cent measured in current prices in 2022. This is due both to a strong increase in volume of 6.5 per cent, but also to increased prices.
In the fourth quarter, household consumption increased 5.9 per cent as a result of a strong rise in goods consumption. Goods consumption increased 8.5 per cent in the last quarter of the year and was mainly driven by an increase in car purchases.
Excluding car purchases, goods consumption increased by only 0.2 per cent in the fourth quarter. Increased electricity consumption also contributed to increase the consumption of goods. Service consumption increased 1.1 per cent from the third to the fourth quarter.
Recreation and culture services and passenger transport contributed the most to the rise, while consumption of restaurant and hotel services fell somewhat.
Norwegians' consumption abroad increased 20.4 per cent, and foreigners' consumption increased 3.7 per cent in the fourth quarter.
Total consumption in general government increased 0.1 per cent from 2021 to 2022. In the fourth quarter, consumption in general government increased 0.9 per cent. Consumption in central government increased 2.3 per cent, while it decreased by 0.4 per cent in local government.
Gross investments for Mainland Norway increased 1.1 per cent in the fourth quarter. It was mainly driven by an increase in service activities incidental to oil and gas. Investments in dwelling services rose 1.4 per cent. Overall, gross investments for Mainland Norway increased 6.6 per cent from 2021 to 2022.
Norway's trade balance is estimated to 1 579 billion NOK in 2022, corresponding to an increase of 190 per cent from last year's record figure. Total exports are estimated to 3 101 billion and were twice the size of imports. The rise was mainly driven by enormous price increase in crude oil and gas. Measured in constant prices, exports rose only 5,9 per cent, while imports increased 10.1 per cent.
In the fourth quarter, exports fell 0.8 per cent, measured in constant prices and adjusted for normal seasonal variation. The decline was mainly driven by crude oil and gas, but also traditional goods. Measured in current prices, exports fell 10.3 per cent from the third to the fourth quarter but are still 21 per cent higher than in the fourth quarter of 2021.
Total imports increased 2.6 per cent measured in constant prices. Traditional goods and services contributed to the rise, while ships, oil platforms and aircraft dampened the growth.
The trade balance in the fourth quarter is estimated at 325 billion NOK and increased by 58 billion NOK compared to the previous year.
Employment increased 0.4 per cent in the fourth quarter, adjusted for normal seasonal variations. Education, information and communication, as well as administrative and support service activities contributed most to the rise. The number of hours worked increased 0.4 per cent. In 2022 employment increased 3.9 per cent, which is the highest growth since 2007. ■