Nationwide GDP tallies sharpest contraction since Q2 2020 in Q3

Mainland GDP growth outperforms expectations: The Norwegian economy took a hit in the third quarter, with nationwide GDP decreasing 1.8% on a seasonally adjusted quarter on quarter basis (Q2: +2.0% s.a. qoq) and marking worst reading since Q2 2020. The downturn was due to extensive maintenance work on gas facilities. In contrast, the mainland economy—which excludes petroleum activities and related ocean transport—gained traction, expanding at a quicker clip (Q3: +0.5% s.a. qoq; Q2: +0.3% s.a. qoq), marking the best result since Q4 2022 and overshooting both market and Norges Bank expectations.

Maintenance work drags on exports and GDP growth: The nationwide quarterly downturn was due to deteriorations in readings for exports plus private and public spending. Domestically, household spending growth fell to 0.4% in Q3 from 1.9% in Q2. Similarly, government spending growth decelerated to 0.8% in Q3 (Q2: +1.1% s.a. qoq). Conversely, fixed investment growth hit an over five-year high of 4.5% in the third quarter, up from the second quarter's 3.5%. Turning to the external sector, exports of goods and services swung to a 4.4% contraction in Q3 (Q2: +6.2% s.a. qoq). Meanwhile, imports of goods and services deteriorated, contracting 0.3% in Q3 (Q2: +4.0% s.a. qoq), marking the worst reading in a year. Meanwhile, on a seasonally adjusted annual basis, nationwide economic growth lost steam, cooling to 3.1% in Q3, compared to the previous period's 4.2% increase. Finally, mainland GDP expanded a seasonally adjusted 1.0% in Q3, accelerating from Q2’s 0.7% rise.

Growth to return in H1 2025: In Q4, our Consensus is for nationwide GDP to post another sharp decline in quarter-on-quarter terms, and for mainland GDP growth to inch down. Moving to 2025, nationwide GDP growth will return in Q1, before slowing thereafter. Overall next year, private consumption is set to expand at a faster clip, supported by lower inflation amid a stronger krone, and greater wealth due to higher house prices.

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