© Reuters. FILE PHOTO: A construction crane is seen operating over Oslo’s city skyline from the roof of the Oslo Opera House, in Norway October 15, 2015. REUTERS/Russell Boyce
OSLO (Reuters) – Norwegian companies expect economic growth to slow in the coming six months, a central bank survey showed on Tuesday, driven by high inflation, capacity constraints and expected higher interest rates dampening demand.
“Constraints have become increasingly widespread across all sectors in the course of spring, except retail trade where somewhat more enterprises now have spare capacity,” Norges Bank said in a statement.
The quarterly survey provides key input to monetary policy. The central bank has said it would most likely raise interest rates on June 23, with a string of more hikes to come.
More than six in 10 businesses surveyed reported full capacity utilisation in May, the highest share in almost 15 years.
Contacts surveyed raised their estimate for annual wage growth in 2022 to 3.9% from 3.7% in February, above the central bank’s latest forecast of 3.7%.
“The report underlines that Norges Bank has fallen behind the curve,” analysts at Handelsbanken said in a note, adding it still expected the central bank to increase its key policy rate by 50 basis points next week.
The survey suggests the economy is under high pressure and in need of higher rates, analysts at Nordea said in a note, but added the higher wage expectations were “nothing major” and did not imply that a 50 basis point rate hike was needed in June.
“Overall, this report also points to an upward adjustment of the rate path next week,” Nordea said.
Norway firms see growth slowing in next six months, survey says