Norway: Unemployment and retail sales pointing in different directions – Nordea Markets

Erik Johannes Bruce, analyst at Nordea Markets, suggests that for the Norwegian economy, retail sales on the weak side, but unemployment on the strong side will send mixed signals, but the Norges Bank will probably give most weight to sign of further labor market tightening.

Key Quotes

“One main takeaway from Norges Bank’s surprise lift of the rate path last week is that the Norwegian central bank is more “data dependent” than we had expected.”

“This week’s two most important key figures, March registered unemployment and February retail sales, will probably point in opposite directions. They are both out on Friday.”

“We expect a sharp drop in retail sales (-1.7% m/m) in February mainly because prices on goods, in contrast to the normal pattern, rose sharply this month (retail sales are in volume).”

“We were somewhat surprised to see Norges Bank’s new forecast for a rather flat development in registered unemployment in the next months given its upward revision to growth in employment. We forecast a drop in unemployment by between 500- 1000 persons s.a. in March. That is somewhat less than the trend, but stronger than Norges Bank’s forecast. Registered unemployment is Norges Bank’s preferred measure for unemployment and essential for its view on the output gap and hence rates. We will give a figure for unemployment on the strong side more weight than a month with weak retail sales.”