Norway may be finally emerging from an oil downturn with companies the most upbeat they’ve been on economy since before the oil crisis, according to a central bank survey. The krone jumped on the news.
A survey of companies across regions and industries now indicates a broad based improvement driven by both public and private demand, according to Norges Bank’s regional network report published on Tuesday. There are even signs that improved economic sentiment has spread to the battered oil regions in the southwest.
The krone strengthened as much as 0.7 percent, the most since May 19, and was up 0.4 percent as of 2:57 p.m. in Oslo.
“The improvement was broadly based among sectors and signals that the contraction in the oil service industry has reached an end,” said Erica Blomgren, chief strategist at SEB in Oslo.
Norwegian growth is now quickening and unemployment receding after a three-year slump caused by a global oil glut. With the government pumping in a massive fiscal stimulus and the central bank cutting the key policy rate to a record, the Norwegian economy is now seen emerging from the worst downturn in a generation.
It may be too soon to extrapolate from the uplift in economic sentiment, as “the growth momentum is highly supported by public spending as well as the housing market,” Marius Gonsholt Hov, an economist at Handelsbanken, said.
With less scope for further oil spending as the government tightens fiscal spending limits and construction activity expected to slow amid cooling housing prices, the main economic drivers since the oil crisis will provide less stimulus ahead.
“Norges Bank is likely to lift its mainland GDP forecast at the upcoming June 22 rate decision,” said Erica Blomgren, while adding that lower prospects for inflation will likely see the central bank maintain its dovish rate path.