Macroeconomic developments in Norway still point towards GDP growth in 2019 in the interval 2.7-3.0%. The labor market is strong with unemployment just over 2%, although the fall in unemployment has levelled off. Based on Norwegian developments in isolation we would be on a path for a very likely rate hike from the central bank rate in September. However, global developments in August pull in the opposite direction with an intensification of the trade war, continued relatively weak macroeconomic data and a marked fall in interest rates.
At present we see a potential rate hike in September from Norges Bank as a 50-50 probability. At any rate, we do not see any further rate hikes in this cycle from the central bank after the September meeting.
The Swedish economy continues to cool off with unemployment increasing a bit and the manufacturing sector feeling the effects of the global contraction in trade volumes. We expect this development to continue and we do not see any further rate hikes from the Swedish central bank. If global conditions continue to deteriorate we could end up seeing rate cuts from the Riksbank in 2020.
Oil price and exchange rates
The oil price decreased from USD 65 to USD 59/bbl. in August. The oil price decrease followed mainly from increased concern about global growth and oil demand going forward. On the supply side we now see the number of oil rigs operating in the US shale oil industry dropping.
Both the SEK and the NOK weakened in trade weighted terms in August. Both currencies seem to be negatively influenced by trade and growth worries in the present market climate as investors focus on the larger safe haven currencies.