– Low activity does not necessarily mean early interest rate cuts – E24

Recession may be the state of the Norwegian economy. This does not mean that the Bank of Norway is cutting interest rates earlier than expected, according to a senior economist.

On Tuesday we will find out how the Norwegian economy developed in November.

Mainland Norway's gross national product grew in September and October, but in the big picture, according to Statistics Norway, growth has been weak in recent months.

– Handelsbanken expects a decline in the Norwegian economy by 0.5 percent in November, which means it has remained stable over the past period, says Sarah Medgaard, chief economist.

Several other brokerages also believe GDP will decline this month, according to estimates obtained by Bloomberg.

– Even if activity declines, this alone does not mean that Norges Bank will cut interest rates earlier than expected, continues Medtgaard.

Handelsbanken's economist notes that the central bank expects a decline during the winter months, and has already taken this into account in its interest rate plan.

In December, the Bank of Norway raised the interest rate to 4.5 percent. Meanwhile, interest rate cuts have only been indicated in 2024, and then only in the fall.

Midtgaard believes activity would have to fall more than expected and unemployment rise faster than expected for the interest rate to be cut earlier than Norges Bank envisaged.

But since they've already planned somewhat less activity, that doesn't necessarily mean a rate cut in the first place, she says.

– Nothing indicates a recession

In the United States, there will also be an indication of how the economy will perform this week.

On Wednesday evening, Norway time, the US central bank, the Federal Reserve (Federal Reserve), presents the so-called “Beige Book”. It is a report on how the central bank perceives the state of the American economy.

Sarah Medtgaard, from Handelsbanken, believes it will be interesting to see what plans companies make regarding employment and wages in the future.

– The previous labor market report indicated that the market is still tight. Meanwhile, the latter noted ISM indexISM indexPurchasing Managers' Indices (PMI) based on surveys among purchasing managers of various companies, conducted by the Institute for Supply Management (ISM) On a marked downward adjustment to hiring plans, Medgaard says.

– So far there is no sign of a recession or a sharp rise in unemployment, she continues.

In December, 216,000 new jobs were created outside the agricultural sector in the United States, which was higher than economists had expected. At the same time, the unemployment rate remained unchanged at 3.7%.

Medgaard notes that several Fed members have stated that they are monitoring unemployment closely.

– She says they are still very concerned that the labor market will not calm down too quickly.

Midtgaard also points out that there will be numbers on industrial production and retail trade in the US next week, but the “beige book” will become more important in the long term.

– The Fed has to take control of services prices, which are still at a somewhat high level. It will be their last “mission”.

Interest rate meeting in China

From overnight until Monday, there will be an interest rate decision from China's central bank, the People's Bank of China. The interest rate on one-year loans is expected to be reduced from 2.5 percent to 2.4 percent, according to Bloomberg.

The country has been characterized by low price growth throughout the past year, linked to, among other things, problems in the real estate sector and weak household demand.

She says there is also growing speculation about whether the authorities should stimulate more activity in the economy, and notes that China's post-pandemic economic recovery has been disappointing.

In December, the central bank launched large medium-term loans targeting Chinese banks.

Season results on the steps

The new results season is just around the corner.

Major US banks Morgan Stanley and Goldman Sachs present their fourth-quarter numbers before opening hours on Wall Street on Tuesday. Companies on the Oslo Stock Exchange begin their reporting season later in January.

Another event of the week is the annual meeting of the World Economic Forum in Davos, Switzerland, which runs from Monday to Friday.

Next week also brings inflation figures from Sweden and the UK, among others, as well as oil market reports from both OPEC and the International Energy Agency (IEA).