Nordea Markets

The April inflation readings are due out on 10 May only hours before the MPC meeting. Core inflation (CPI-ATE inflation) should drop strongly from the 1.5% reading in March due to sharply lower year on year growth in air-fares (an Easter effect). We forecast 0.9%, consensus is 1% while Norges Bank’s fore-cast is 0.8%.

April inflation will not influence the rate decision. But a reading differing strongly from Norges Bank’s forecast could have an impact on the wording at the press conference. It would also affect the market’s view on future decisions.

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Erik Bruce
Chief Analyst
Economic Research

The seasonally adjusted retail sales figures showed a growth in March of +2.1% m/m (!) after a revised +1.5% m/m in February and 1.0% in January, i.e. very strong Q1 with 2.4% Q/Q. The trend in retail sales so far in 2012 is much stronger than Norges Banks’s forecast for private consumption.

As Statistics Norway points out, there may be some problems with adjusting for Easter and that the March and April figures should be seen together. Despite this, the figures for Q1 are undoubtedly very strong. Growth in the consumption of goods indicator (which includes cars and electricity and is the best indicator for private consumption of goods in the GDP figures from National Accounts) was somewhat smaller but still strong with 1.7% m/m and +1.6% Q/Q.

Else, Statistics Norway’s business tendency survey showed an increase in the total index to 9 from 6 in Q1. Better conditions in domestic markets and still weak conditions in export markets is the main picture.

Today’s figures for retail sales and consumption of goods show a strong momentum in private consumption at the beginning of 2012. There might be some “Easter effects”, but still Q1 is very strong and stronger than Norges Bank’s forecast for growth in private consumption. The upside risk to our forecast of a hike in March 2013 has increased significantly. We believe Norges Bank wants to see the April figures before taking action, but an upward revision of the central bank’s rate path in the June report looks very likely.

Katrine Godding Boye
Senior Analyst
Economic Research

he number of registered unemployed and on special labour market schemes increased in April seasonally by about 550 persons. We had expected a decline of 600 persons, consensus a decline of 200 persons. The unemployment rate (not seasonally adjusted) was unchanged at 2.6%. This was a slightly weaker number than expected, but Easter may have disturbed the seasonal adjustment. However, the published numbers from NAV also indicates a small increase in persons seeking jobs and a small decline in new jobs offered. Both we and Norges Bank expects slightly lower unemployment rate going forward. But increase in April is too small to have any influence on Norges Banks rate decision in May.

Steinar Juel
Nordea Markets