New figures from the National Accounts show that the gross domestic product (GDP) for mainland Norway fell from June to July. A decline in wholesale and retail trade, and net tax revenues on products contributed to the slump. Growth in parts of the manufacturing industry, construction, and in some service industries, dampened the overall decline. Due to the high price increase for natural gas, the preliminary figures show a monthly trade surplus of 143.4 billion kroner.
Household consumption decreased in July. In particular, the consumption of goods decreased, but also the consumption of some services. Seasonally adjusted, there was modest growth in direct purchases abroad by resident households. The consumer price index has increased sharply in recent months, also excluding energy products.
– Consumption of goods in Norway fell in July, without a corresponding growth in consumption of services, or consumption abroad. This could indicate that the recent rise in prices and the interest rate hikes have started to dampen household demand, says Head of National Accounts, Pål Sletten.
The decline in purchases of domestic goods results in lower VAT, which in isolation reduces the GDP of Mainland Norway. Measured in base value rather than in market value, i.e. excluding net product taxes, the development in Mainland Norway was flat in July.
– July is a holiday month, and for some industries this means less activity, while there is higher activity for others. There is thus greater uncertainty around the underlying growth than there is otherwise this year, says Sletten.
Industries
Overall, value added decreased 0.4 per cent in the market-facing service industries. The fall mainly stems from wholesale and retail trade, in which value added decreased by 1.7 per cent. This in turn contributed more than 0.1 percentage points to the decline in GDP of Mainland Norway. Growth in real estate activities and professional, scientific and technical activities dampened the decline.
Manufacturing, which has had low growth over the past year, had an overall increase of 3.6 per cent in July, which increased the GDP of Mainland-Norway by 0.2 percentage points. Strong growth in the manufacturing of basic pharmaceutical products, chemical products, and computers and electronic products accounted for most of the overall growth.
The volume of other goods production grew by 0.3 per cent overall in July. Activity in fishing and aquaculture decreased modestly, while the volume in the electricity industries fell by 1.4 per cent. The price of electricity continued to increase in July, thus the electricity industries increased by 2.3 per cent, measured in current prices. The volume in construction grew by 1.0 per cent.
Value added in the general government fell by 0.6 per cent. Central government activity increased 0.3 per cent, while local government activity declined by 1.4 per cent. Municipal teaching and care services, kindergartens and after-school activities reduced the volume in the general government overall. However, there is greater uncertainty than usual about the monthly development in these areas during the summer months.
The price of natural gas rose sharply in July, from an already historically high level. As a result, the monthly value within extraction of natural gas and crude oil grew by around 20 per cent, which increased overall GDP by almost 7 percentage points, measured in current prices. The volume in the extraction industry grew by 4.9 per cent.
Consumption
Household consumption fell by 1.6 per cent in July, due to a broad decline in the consumption of both goods and services. Direct purchases abroad by resident households increased by 2.1 per cent, seasonally adjusted.
Domestic purchases of goods have had a downward trend since the reopening of the society. This trend continued in July, where household consumption of goods fell by 2.7 per cent. Lower consumption of food and beverages, clothing, appliances and transportation products contributed to the decline. Consumption of services decreased by 0.6 per cent, mainly due to lower consumption of sporting, amusement and recreation services restaurant and hotel services, as well as repairs of automotive transport.
The sharp rise in prices for several types of consumer goods and services continued in July. Compared to the same period in 2021, the consumer price index increased 6.8 per cent. This increase reduces household purchasing power. Between June and July, the main contributor to rising costs of household consumption were increases in food and beverage prices.
The preliminary figures show a 0.7 per cent decrease in general government consumption in July. Consumption in the central government fell by 0.1 per cent, while consumption in local governments fell by 1.3 per cent.
Export and import
Measured in current prices, total exports grew by nearly 16 per cent in July, while imports fell by just under 1 per cent. Thus, preliminary national accounts figures show a historic monthly trade surplus of NOK 143.4 billion in July. The monthly growth in total exports is mainly due to a further increase in the already record-high price of natural gas.
Measured in fixed 2019 prices, total exports rose by 1.1 per cent in July. The growth in volume came both from increased exports of petroleum products and from other goods, including automotive fuels. The volume of service exports, on the other hand, fell by 2.2 per cent. Lower exports of foreign shipping and audit, legal and technical services contributed to the decline.
Imports, measured in fixed prices, decreased by 0.7 per cent in July. Lower imports of goods, particularly metals, contributed the most. Imports of services grew by 0.5 per cent mainly due to increased air traffic abroad.
Investments
Gross fixed capital formation fell by 1.6 per cent in July. There was also a decrease over the three-month period May-July, compared to the period February-April, of 1.6 per cent. Following a decrease of 1.2 per cent in June, investments in dwelling services fell further by 1.5 per cent in July. The rolling three-month decline was 3.1 per cent.
For gross fixed capital formation, there is low availability of monthly information. For petroleum investments, investments in manufacturing, mining and power supply, information on planned investments is used as reported by the companies.
Revisions
In connection with new monthly and quarterly figures, retroactive revisions might occur. The statistics used will not normally change backwards, but seasonally adjusted series can still be affected. This is because the basis for the seasonal adjustment changes when new periods are added.
Throughout the corona pandemic, from March 2020 to March 2022, new figures were treated as extreme values, and were not included in the basis for the calculation of the seasonal pattern. The many changes in national accounts figures since February 2020 means that new periods that are now added in the seasonal adjustment, from and including April 2022, can produce larger revisions than normal in the seasonal pattern.
In some areas, new datapoints for previous months have been incorporated. The macro picture is nevertheless still as previously published.
In connection with the publication of the quarterly National Accounts for the 3rd quarter, Statistics Norway will publish the final National Accounts figures for 2020 on 18 November 2022. In addition to providing a more complete picture of the first year of the pandemic, certain revisions will be incorporated in National Accounts figures for previous years. The final national accounts for 2020 replaces the preliminary national accounts for 2020. While the latter is a projection based on indicators from the last published final annual accounts (2019), the final national accounts are based on much more detailed data sources. Particularly important is the business statements from enterprises, which provides a basis for more precise calculations of the gross product in the various industries. We will thus learn more about how the Norwegian economy fared in the first year of the pandemic. In conjunction with the publication of the final figures for 2020, certain quality improvements are also carried out. These changes are also incorporated for previous years to avoid breaks in the time series. The most significant revisions for previous years are: Improvements in the calculations of free banking services, so-called FISIM (Financial Intermediation Services Indirectly Measured). New data source and guidelines for production processes across national borders, where goods pass national borders without a change of ownership (processing) and income related to the purchase and sale of goods abroad (intermediary trade). New calculation scheme for the central bank's activity. The revisions are not expected to have a major impact on Norwegian GDP overall, but could affect the value added of individual industries, the composition of access to and use of Norwegian goods and services, and operating profit and wage cost shares in individual industries.