Nordea Markets

Registered unemployment (including those on labour market measures) in January was 81 561 compared to 83 887 last month. Nordea and consensus was 84 300. The unadjusted unemployment rate was 2.8% compared to Nordea and consensus at 2.8%.  

This was a surprise to us. Unemployment fell by 2 300 persons while we had expected a gradual rise in unemployment in line with the weaker outlook in some industries. One should be a bit care full to judge the January figure The drop is dependent on getting the seasonal factors right since unadjusted unemployment always rise sharply in January (hence the rise in the unadjusted  unemployment rate from 2.4% to 2.8%). Still no doubt this is a strong figure. It seems to be easier for all the new entrants on the labour market in January to find a job. Unemployment is down 5700 persons y/y compared to 4500 y/y in December.

The seasonal adjusted unemployment rate excluding those on labour market measures (which is what Norges Bank forecast) is now about 2.4% somewhat on the downside to Norges Bank forecast for Q1 given in the October monetary policy report. This despite the general economic outlook being on the weak side. Registered unemployment is significant for Norges Banks view on the output gap and hence monetary policy. We are now in doubt about our forecast for another rate cut.


Erik Bruce
Chief Analyst
Economic Research

 

The Labour Force Survey (LFS) unemployment rate in November was 3.4%% unchanged from October (revised up from 3.3%). Consensus and Nordea was 3.3%.

In July unemployment was 3.2% and there is a slight upward trend during the autumn. Employment is still rising, but labour supply is rising somewhat faster. We would normally not give much weight to such a short lived and moderate movement given the volatility in these figures. Still we expect unemployment to move somewhat upwards the coming months given the weakness in some industries and these could be the sign of such a trend. Norges Bank forecasted the opposite movement back in October with unemployment decreasing to an average at 3.0% this year. If anything slightly on the weak side to Norges Banks forecast.

Ignore the January PMI

To our surprise it seems that the market gave some weight to the seemingly strong January manufacturing PMI released earlier today. The PMI obviously have some problems with the seasonal factors or something like that. After the hard to understand weak December figure at 46.6 it now increased to 54.9. If anything one should look at the average which is about 51. That is in line with the about sideways trend in manufacturing production. Norges Bank will conclude as we do.


Erik Bruce
Chief Analyst
Economic Research

 

Growth in retail sales in December was-0.3 % m/m. Nordea forecast was 0.0% m/m while consensus was 0.1%m/m.  Consumption of goods were down 0.1% m/m.

There is an upward trend in retail sale, but it is much weaker than what is implied by Norges Bank’s forecast.  In December and November retail sales were up only 1.1% y/y (volume and adjusted) indicating a very moderate Christmas shopping. Consumption probably grew by 2 ¼% in 2011 compared to Norges Banks forecast for a growth at 2 ¾% given as late as in October. And everything indicates that it’s forecast for a growth at 4 ½% in 2012 is far too high.

Credit growth in December was 6.7% y/y up from 6.6% last month. Nordea was 6.7% while consensus was 6.4%. The upside surprise was credit growth to the firms which increased rather strongly. Credit growth to household is nearly flat. No signs of a credit crunch this far at least.
 
Norges Bank will probably give most weight to the consumer figures which is on the weak side to its forecast. We continue to believe in a cut this year.
In February, Norges Bank will purchase foreign exchange equivalent to NOK 350 million per day for the Government Pension Fund Global, unchanged from January.


Erik Bruce
Chief Analyst
Economic Research

 

The clock is ticking – Monday is vital for the oil market and oil prices as the EU members will meet to finalize new sanctions against Iran. International pressure is mounting on Iran to suspend its nuclear enrichment program.

Iran’s threats to close down the Strait of Hormuz if the EU imposes sanctions on Iran’s oil exports have worried large oil consuming countries such as China, India, South Korea and Japan, importing a vital share of their oil from Iran.

A closedown of the strait can push oil prices far above the current oil price at around USD 111/barrel depending on the escalation in tension. Oil prices have already increased by around USD 6/barrel on concerns over global oil supplies, but a possible embargo driven halt in oil exports, military confrontation in the Strait of Hormuz damaging parts of the shipping fleet, refineries or production installation or/and an Israeli attack on Iran’s nuclear facilities can push oil prices up to between USD 120-200/barrel.

European nations agreed yesterday to sanction Iran’s central bank, freezing assets used to finance its nuclear ambitions, but did not come to an agreement on an oil embargo. Diplomats from the 27 EU nations have been meeting this week to draft a proposal for an oil and financial embargo against Teheran that would formally be adopted when foreign ministers meet Monday. Concerns from Greece prevented a deal on the proposed oil embargo, but it is likely that EU members will have another go to draft a proposal ahead of the foreign ministers’ meeting.

Large oil importers have already started to look at alternative suppliers of oil to spread their risk away from Iranian supplies. In Europe refiners have started to sever links with Iran stopping spot purchases of crude ahead of the EU meeting. Some refiners have either stopped or reduced new purchases of Iranian oil, although they continue to receive monthly oil supplies under long-term agreements. Representatives from China wrapped up their trip to Saudi Arabia, the United Arab Emirates and Qatar trying to reduce the risk of relying too much of one region or supplier. These concerns have intensified as Iran, China’s third largest foreign supplier after Saudi Arabia and Angola had come under increasing pressure lately.

US officials have travelled the world to try to get countries to comply with its new sanctions against Iran targeting the central bank which routes most oil transactions. So far neither China nor India have agreed to support the new sanctions against Iran. Without support from large market players such as China and India, the sanctions will be less effective as the Iranian economy will not be affected to the same extent. Oil exports account for nearly 80% of Iran’s total exports and 50% of the government’s revenue. The loss of oil export revenues could add to the existing tension within the regime.

Thina Margrethe Saltvedt
Senior Analyst
Economic Research