Norges Bank, fund

Regional network: Growth has slowed further – Norges Bank

According to Regional Network contacts, activity growth has continued to decline through winter. Weak demand from export markets, lower residential construction and reduced retail sales had a dampening effect on growth. In addition, the completion of transport and oil production projects contributed to lower growth. Enterprises expected growth to continue to drift down in the next six months.

After the ordinary survey, the spread of coronavirus has increased. A second phone survey of a sample of contacts was therefore conducted. The new information from the phone survey is not included in the published figures. The outbreak and the measures to contain it appear to have consequences for large segments of the business sector, inter alia in the form of reduced demand and delays in goods deliveries. Over a third of enterprises participating in the phone survey have revised down their growth outlook in recent weeks.

In the interview survey, contacts reported that activity had increased by an annual rate of 1.8 percent, down from 2.1 percent in the previous survey. Growth was slightly weaker than contacts envisaged in November, but close to the average for the period between the financial crisis in 2008 and the present. Growth slowed most in the export industry, construction and oil services, and turnover volume in retail trade declined further. The services sector continued to show solid growth.

Capacity utilisation has shown little change since spring 2019, while the labour market has tightened slightly. Contacts expected annual wage growth of 3.2 percent in 2020.

The ordinary interview period was 27 January to 14 February, and 339 enterprises participated. In the phone survey conducted in the period 4 – 6 March, 82 enterprises were interviewed, and all sectors were represented. The latest information suggests that the virus outbreak will weigh on activity in the Norwegian business sector ahead. So far, reduced travel activity and fewer customers in shops are having the greatest dampening effect on activity, but delayed deliveries are also a growing challenge. Many enterprises are concerned that growth could be restrained further by higher sickness absence ahead. There is considerable uncertainty regarding the duration of the outbreak, and a number of contacts have implemented temporary hiring freezes. Few enterprises are planning workforce reductions, but some mentioned the possibility of layoffs.

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