Zero growth for Norwegian economy in Q2
Article continues below
From May to June there was also no growth.
This is shown in seasonally adjusted figures from the National Accounts.
Investments in dwelling services fell for the second quarter in a row. Apart from car purchases, which were exceptionally low in the first quarter of 2023, household consumption fell in the second quarter.
"Growth flattened in the first half of 2023. Strong growth in prices and a higher interest rate has dampened purchasing power, which reduces demand. The results in a general cooldown of the economy," says PÃ¥l Sletten, Head of National Accounts.
Construction was the industry with the most significant negative contribution to GDP. This should be viewed in relation with reduced dwellings investments amongst households and changed rules for hired labour.
The Norwegian krone continued to weaken against the currencies of the country’s largest trade partners. This led to the prices on imports continuing to increase.
In total, import prices increased 1.2 per cent from the first to the second quarter, and was therefore 7.7 per cent higher than the second quarter last year.
The portion of the price increase that was not due to import prices, can be measured with the gross product deflator for Mainland Norway. This increased 1.1 per cent in the second quarter, and therefore was 5.1 per cent higher than the second quarter last year.
"Prices continues to increase, but the components change. When viewed in isolation, energy prices contributed to a decline of the price growth in the second quarter, but on the other hand, prices is pulled fown by other industries," says PÃ¥l Sletten.
Both tradable and non-tradable industries contributed to the price growth in the first half of the year. The development in non-tradable industries was partially a delayed effect from 2022, when sale prices decreased less than production prices.
The trade balance continued to weaken from the record high levels of 2022, but Norway still has a historically high surplus in a historic context.
Energy prices, which have been high throughout large parts of 2022 and the beginning of 2023, fell through the first half of 2023. In the second quarter, it is particularly the prices for natural gas and electricity that have fallen.
The gross product in the service industries, including dwelling services, increased 0.1 percent in the second quarter.
Development was generally weak, but volume increased in financial and insurance activities and wholesale trade and retail. The growth in finance can be attributed to increased activity in banking, as well as steady growth in interest margins.
The increase in wholesale trade and retail occurs because of growth in car purchases, which were exceptionally low in the beginning of 2023.
The low car purchases is due to the tax increase on electric vehicles that started in January 2023, which resulted in an unusually high purchases of cars at the end of the year.
At the same time, gross product in administrative and support service declined. This was primarily due to temporary employment agency activities. This must be viewed in relation with new and tighter rules for temporary employment that were enforced on April 1st this year.
Manufacturing and fell 0.2 per cent in total. Rubber, plastics and mineral manufacturing contributed most to the decline, which could be due to several days with production stop and the strike in April.
In addition, falling activity in construction has reduced demand for goods that these industries produce. The low activity in construction has also affected the manufacture of paper and paper products.
At the same time, the portion of manufacturing that supplies the oil and gas industry boosted activity. This can be seen in connection with increased investments in the extraction on the Norwegian continental shelf.
Gross product in other goods production, which consists of the primary industries, electrical power and construction, had a decline of 0.4 per cent in total. Construction contributed most to the decline.
New construction of business buildings and housing, and many public construction projects has been delayed because of high construction costs.
Gross product in public administration grew 0.3 per cent, adjusted for seasonal and calendar effects, and measured in fixed prices.
Both central and local government had 0,3 per cent growth, and therefore both had a positive contribution. In central government education had the largest contribution. In local government there was a broad uptick, but local health services contributed the most.
The volume for crude oil and natural gas, including services, grew 1 per cent. Oil production increased throughout the quarter, but gas production declined.
The latter is primarily due to maintenance of production and transportation infrastructure in the North Sea. Mining support service activities had no growth, measured in fixed prices.
Household consumption increased 0.6 per cent in the second quarter. Excluding goods consumption, household consumption decreased 0.2 per cent.
Increased prices have reduced households’ purchasing power, and in June the consumer price index (CPI) rose 6.4 per cent compared to the same month the previous year.
Goods consumption increased 1.6 per cent. The entire increase can be attributed to the consumption group car purchases, which increased 18.2 per cent. Service consumption decreased 0.3 per cent.
The decrease is broadly based, but recreational services in particular contributed to the decrease.
Norwegians’ consumption abroad decreased 2.5 per cent in the second quarter. Foreigners’ consumption in Norway decreased 7.8 per cent.
Total consumption in public administration increased 0.6 per cent. Consumption was unchanged in central government and increased 1.3 per cent in local government.
Gross investments for Mainland Norway decreased 1.2 per cent in the first quarter. The decrease is mainly due to investments in dwelling services, but investments in public administration also had a small decrease.
Investments in production of other goods and services increased, Investments in dwelling services decreased 7.3 per cent.
Total exports increased 1.4 per cent in the second quarter, measured in constant prices and adjusted for normal seasonal variation. Exports of traditional goods, ships, oil platforms and modules and crude oil and natural gas, while exports of services decreased.
Seasonally adjusted volume figures showed the imports increased 1.7 per cent. Imports of traditional goods and oil platforms and modules contributed most to the growth.
Employment increased 0.1 per cent in the second quarter, adjusted for normal seasonal variation.
Despite the uptick, this was the lowest growth in employment since the end of 2021. Information and communication contributed the most to the increase, while administrative and support service activities and construction contributed to decrease the growth.
The number of hours worked increased 0.2 per cent. ■