OSLO, Aug 23 (Reuters) - Norway’s underlying growth remained strong in the second quarter and could receive a further boost next year from plans to raise oil industry investments, two reports by Statistics Norway (SSB) showed on Thursday.
The highly anticipated data lends support to the central bank’s plans to begin tightening monetary policy next month, economists said. It would be the first time in seven years for Norwegian rates to rise, from a record low of 0.5 percent.
Non-oil gross domestic product expanded by 0.5 percent in the second quarter from the first, weighed down by lower power production from hydro-electric dams but still in line with expectations in a Reuters poll of economists.
“When adjusting for the lower electricity output, mainland GDP expanded by 0.7 percent in the second quarter, which is spot on with regards to the central bank’s forecast,” Danske Bank Chief Economist Frank Jullum said.
The Norwegian central bank plans to raise rates by a quarter percentage point in September and has said it will continue to tighten policy in 2019 if the economy develops as expected.
A separate SSB survey pointed to further growth in investments by the country’s oil industry next year, reinforcing the expectations of steady rate rises into 2019, analysts said.
“The oil investment forecasts point to growth of five to eight percent in 2019, which is slightly on the upside of expectations and will generate significant growth for Norway next year,” Danske Bank’s Jullum said.
The crown currency (NOK), which has weakened in recent months amid turbulence in global trade, strengthened against the euro to 9.6765 after the 0600 GMT release of GDP and oil investment data, from 9.6840 just ahead of the publication.
The numbers could, if anything, lead to even further tightening of monetary policy, Nordea Markets economist Erik Bruce wrote in a note to clients.
“With NOK clearly on the weak side and inflation on the high side, there are good reasons to expect not only a hike in September, but also a revision up of the rate path,” he added. (Editing by Gareth Jones)