Higher interest rates and increased costs for housing developers have contributed to stifling investment in the housing market. Statistics Norway says this will result in lower growth in the Norwegian economy. That is why they are predicting interest rate cuts in 2024. – We expect housing investment to fall by more than 30 per cent this year and next year, says Thomas von Brasch, head of research at Statistics Norway. The reason for the decline in the housing industry is little security around the economic situation, lower sales of second-hand homes, higher interest rates and increased costs. Thomas von Brasch at Statistics Norway and is project manager for Economic trends. In November, the National Association of the Construction Industry announced that they were afraid of losing 30,000 workers and asked for emergency money. According to Nav, the number of unemployed in construction has increased by 37 per cent since October last year. More unemployed means less economic activity, which “cools down” the economy. Statistics Norway also expects an increase in unemployment going forward, i.e. to 4 per cent in 2025. Not just in the housing industry. – We also expect an increase in unemployment when more Ukrainians register in the labor market, says von Brasch. The interest rate peak has been reached – the cut will start in 2024. In September, Norges Bank raised the key interest rate to 4.25. This is the 13th time they have raised the interest rate since 2021. We are at the highest interest rate level since 2008. The interest rate will remain at the current level of 4.25 until the middle of 2024. After that, Norges Bank will lower it gradually, Statistics Norway predicts. – The halt in housing construction and weak growth prospects, combined with falling interest rates and inflation for our trading partners, means that the interest rate peak has probably been reached, says von Brasch. Weakest krona in many years The Norwegian krona has not been weaker since the pandemic. In theory, the weak krona can cause prices to rise, which in turn can cause Norges Bank to raise interest rates. – Norway is a small and open economy, and the exchange rate plays an important role. A weakened krone so far this year has contributed to the fact that it will take longer than for our trading partners before inflation goes down, says von Brasch. According to Statistics Norway, the weak krone will keep inflation high for a while longer. In May, central bank governor Ida Wolden Bache met the finance committee in the Storting to explain why the krona is weak compared to other countries. Then she had three explanations: Interest rates have risen more than here at home The krona often weakens when there is unrest in the financial markets The price of oil is somewhat weak Possible new interest rate jump in December In November, Norges Bank left the policy rate at 4.25, but warned of a possible new rate hike in December. It is still uncertain: – If we become more certain that the underlying price increase is on the way down, the interest rate can be kept calm, said Norges Bank in September. – Statistics Norway believes in lower inflation and interest rates than Norges Bank has outlined. That puts pressure on Noregs Bank before the interest rate week next week, says chief economist Kyrre M. Knudsen at Sparebank 1 SR-Bank. Yesterday, Noregs Bank’s regional network presented a report in which they predict that Noregs Bank is finished with the interest rate jump. In November, however, Statistics Norway announced that prices have risen by 4 per cent in the past twelve months. – This is probably a figure that leans against Norges Bank raising interest rates in December, said chief economist Harald Magnus Andreassen at Sparebank 1 Markets at the time. Real wages also predicted to increase Statistics Norway’s forecasts also say that wages will increase. Last year, wage growth was 4.3 per cent, which was less than price growth. In practice, this means less purchasing power despite the wage increase. Statistics Norway believes that this will not be the case in the future. – The labor market is still tight. Merit in the front subject is also good. That will push up wages, says SSB’s Thomas von Brasch. Statistics Norway says that annual wage growth will be 5.6 per cent this year. The same estimate also has inflation. This means unchanged real wages in 2023. But going forward towards 2026, the forecasts for Statistics Norway say that inflation will decrease, and wages will increase by 2 per cent in 2026. This also means an increase in purchasing power.
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Statistics Norway predicts an interest rate cut after a sudden stop in the construction industry
