Economy accelerates in Q2

GDP reading: The Norwegian economy gained notable steam in the second quarter, when nationwide GDP growth improved to 1.4% from 0.3% in Q1 on a seasonally adjusted quarter-on-quarter basis. Meanwhile, the mainland economy—which excludes petroleum activities and related ocean transport—grew 0.1% in seasonally adjusted quarter-on-quarter terms in Q2, matching Q1’s increase; this result undershot both market and Norges Bank expectations.

Drivers: The nationwide quarterly upturn reflected broad-based improvements. Domestically, household spending bounced back, growing 1.5% seasonally adjusted quarter on quarter in Q2, which marked the best reading since Q4 2022 (Q1: -0.7% s.a. qoq). A continued recovery in purchasing power—with year-on-year wage growth outpacing inflation for a fourth consecutive quarter—likely supported household spending and particularly car purchases. Similarly, fixed investment growth hit an over two-year high of 5.1% in the second quarter, rebounding from the first quarter's 7.6% contraction. Moreover, public consumption picked up to a 0.7% increase in Q2 (Q1: +0.3% s.a. qoq). Turning to the external front, exports of goods and services rebounded, growing 5.6% seasonally adjusted quarter on quarter in Q2, which marked the best reading since Q3 2022 (Q1: -1.4% s.a. qoq), partly due to a weaker krone. In addition, imports of goods and services rebounded, growing 3.1% in Q2 (Q1: -0.4% s.a. qoq). Meanwhile, on a seasonally adjusted annual basis, nationwide economic growth improved to 2.6% in Q2, following the previous quarter's 1.0% expansion and marking the strongest increase in two years. Finally, mainland GDP expanded a seasonally adjusted 0.5% year on year in Q2, matching Q1’s rise.

GDP outlook: Our panelists expect nationwide GDP growth to decelerate to a near halt in sequential terms from Q2 in Q3 and then inch up in Q4. That said, there are upside risks to that projection from stronger-than-expected private spending; consumer sentiment and purchasing power should be boosted by lower inflation and unemployment rates plus expectations of interest rate cuts.

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