Mainland GDP fell slightly more in March than first projected

- The macroeconomic picture has thus not changed significantly from the preliminary figures published on April 24th, says director of National Accounts, Pål Sletten. Mainland-GDP, adjusted for seasonal variations, was then estimated to have dropped 1.9 percent in Q1 and 6.4 percent from February to March. The more complete estimates thus show a somewhat stronger decline.

- The decline in March is more severe than anything we have seen before, says Sletten. The sharp fall in GDP for Q1 came mainly after March 12. Tentative figures for the development in the latter half of March compared with the first half of March, published before Easter, showed a decline of around 14 per cent.

National Accounts for Q1 and March 2020 published today are based on a more complete source material than the preliminary figures, especially for the demand components. There now exist among, other things, statistics on investments made in oil and gas extraction, industry and power supply; production indices for industry and mining and construction, as well as information on export and import of services. In addition, updated figures for public and international accounts, as well as calculations for salaries and employment have been included. Information from the newly created compensation scheme for companies with large turnover declines has also been taken into account.

- The expanded source material reduces the uncertainty compared to the preliminary projections, says Achraf Bougroug, who’s responsible for the quarterly calculations. Due to the unusual situation in March, we still consider the monthly figures to be more uncertain than usual. This applies especially to the figures for investments, as well as for imports and exports of services.

The decline in mainland GDP is mainly due to updated estimates for accommodation and food service activities, as well as for arts, entertainment and other service activities. Construction also declines somewhat more than first estimated, see figures 3 and 4.

Manufacturing dropped 1.5 per cent in Q1 and 4.1 per cent in March. There are clear differences between the various manufacturing industries. Those closely linked to petroleum activities saw a sharp decline, while manufacture of food and beverage products grew more than 6 per cent in March, due to a rise in demand by households.

Overall, the service industry fell 2.6 per cent in Q1 and 8.0 per cent in March. Arts, entertainment and other service activities, as well as accommodation and food service activities, were hit particularly hard, with significant declines in both Q1 and March. The travel restrictions caused the gross product in transport activities (excluding ocean transport) also dropped significantly. Wholesale and retail trade, as well as services incidental to oil and gas, also felt the effects of the COVID-19 measures.

Production of goods excluding manufacturing and mining fell 1.1 per cent in Q1 and 5.0 per cent in March. This industry group includes production of electricity and fishing, which pulled up the activity in Q1. Electricity production was the sole positive contributor in March, experiencing a 9.3 per cent growth. Construction was the largest negative contributor in this industry group, in both Q1 and March.

The government’s gross product declined 1.2 and 6.1 per cent in Q1 and March.

Oil and gas production was not significantly affected by COVID-19, as petroleum activities increased 1 per cent in Q1. Activity remained unchanged from February to March. As a result, GDP, including oil and gas, pipeline transport and foreign shipping, fell 1.6 percent in Q1 and 5.8 per cent from February to March.

Household service consumption fell sharply

Infection control measures led to an immediate fall in household consumption. In total, household consumption fell 11.7 per cent in March, with service consumption seeing the largest decline. Household consumption was down 3.6 per cent in Q1.

Consumption of goods fell 4.0 percent in March. The decline was particularly strong for clothing and shoes, but a drop in car purchases also reinforced the development. On the other hand, the consumption of food and beverages increased sharply and dampened the decline. In Q1, consumption of goods fell 1.3 per cent.

Service consumption fell 15.2 per cent in March. The fall was broadly based, but greatest in the consumption of services that were closed or regulated by infection control measures. This was particularly true of arts, entertainment and other leisure services, passenger transport, hotel and restaurant services, daycare services and personal services such as hairdressers and beauty care. In Q1, service consumption fell 5.0 percent.

Due to travel restrictions, household purchases abroad fell 56.8 per cent in March and 16.7 per cent in Q1. In contrast, foreigners' consumption in Norway also fell. Public consumption fell 3.9 per cent in March and remained unchanged from Q4 2019 to Q1 2020.

Investments decline in all industry groups

Total gross investment fell 5.1 percent in Q1. The decline was broadly compounded. Having largely increased through 2019, investments within both the petroleum industry and manufacturing fell in Q1. Q1 investments in the mainland industries and general government fell 4.8 and 6 per cent respectively. The decline in public investment must be seen in the context of strong growth for local government investments in Q4 2019.

Household investment in dwellings fell 4.9 percent in Q1. This is partly due to investment in dwellings declining towards the end of 2019 and through the start of 2020.

Exports and imports both decline

Exports of goods and services fell 2.4 per cent in the first quarter. The decline was sharpest for exports of goods. Oil and gas, in particular, contributed to the decline. Service exports are also estimated to have fallen, among other things, as a result of the sudden decline in foreign travellers to Norway in March and the decline in international transport.

Reduced travel traffic also contributed to a fall in services imports. This was particularly the case for Norwegians' consumption abroad and imports of passenger transport services. Imports of traditional goods fell throughout the quarter, contributing to total imports falling by about 5 per cent.

Stable employment, but hours worked declined

Total employment remained unchanged from Q4 2019 to Q1 2020, adjusted for normal seasonal fluctuations. This trend was roughly the same for most industries. One of the exceptions was accommodation and food service activities, where there was a slight fall in employment in the first quarter, after rising through last year.

Hours worked decreased by 2.3 per cent from Q4 2019 to Q1 2020. The decline must be seen in light of layoffs in March and other absences from work caused by COVID-19. Working from home, is not considered an absence from work in this context. While the number of employed persons is not affected by the layoffs, these are reflected in a reduced number of hours worked. The decline from Q4 2019 to Q1 2020 was particularly large in accommodation and food service activities, with a fall of 5.9 per cent and in arts, entertainment and other service activities, where the decline was 5.5 per cent.

Revisions

With new monthly figures come revisions. The statistics used will not normally be subject to a revision, but seasonally adjusted series may, however, be changed. This is a consequence of new information being incorporated into the seasonal adjustment. The National Accounts recently published an article about the revisions in the monthly national accounts.

Estimates for previous quarters have changed somewhat, compared to the publication of the quarterly National Accounts on February 7th, 2020. Quarterly growth in mainland GDP in Q4 2019 has been revised down from 0.2 to 0.1 per cent. This does not affect annual growth in 2019, which is still estimated at 2.3 per cent. Household consumption was revised down from 0 to -0.4 per cent in Q4 2019. This means that annual growth in household consumption for 2019 is reduced from 1.6 to 1.4 per cent.

 

National Accounts for April 2020 will be published on June 5th.