Attention is fixed on the use of oil money: – The national budget will certainly be the most important

The government presents the state’s general budget proposal for 2024 on Friday.

– The national budget will certainly be the most important for the markets here at home this week. It is difficult to predict, but we and Norges Bank expect a neutral budget with the use of oil money unchanged, says chief economist Marius Gunsholt Hof at Handelsbanken.

He stresses that it is the use of oil money in particular that will be exciting. An expanded budget with increased use of oil money will have a negative impact on the pressure on the economy, keep prices high and lead to increased and continued rise in interest rates. Decreased use of oil money could contribute to interest rates starting to fall again more quickly.

Hof says he agrees with Norges Bank’s estimate of withdrawing 2.7 per cent of the value of the oil fund, which is the same as last year. This will give a so-called zero budget boost, i.e. a neutral budget. This, in turn, will help Norges Bank stick to its plan of raising interest rates again before peak interest rates are reached, and next year can slowly start lowering interest rates.

“I think you’re keen to keep the budget neutral, but we won’t get the answer until Friday,” Hof says.

Housing prices continue to fall

But before the state budget, Eiendom Norge comes up with house prices for September. Hof says there has been a clear change in the pace of the downward trend in house prices over the past four months, which he expects to continue.

-We are in the middle of the fall season, which will be clearly weaker for the housing market. September is typically a weak month, and we think home prices have fallen more than usual this year, Hoff says.

He says Norges Bank has pretty much taken everything into account regarding falling house prices, so this in itself will not affect interest rate setting. Therefore, the plan to increase the interest rate by 0.25 percentage points again this year will remain in place.

Working numbers without shutdown

Internationally, there will be more economic numbers from the US, but it is the US jobs numbers that will dominate the markets this week.

On Sunday night, politicians in Congress in Washington gave themselves a 45-day deadline to approve the national budget. As a result, there will be no closures or “shutdowns” of government jobs in the United States of America at this time. This means, among other things, that ministries and statistical authorities will, as usual, prepare and publish the statistics on which the markets rely.

Job vacancy statistics (Jolt) will be published on Tuesday, and before Friday there will be employment numbers (non-farm payrolls), unemployment numbers and wage statistics for September.

– A tight labor market is absolutely crucial to the pressure on wages and prices, and thus inflation and the setting of interest rates, says Hof.

He says the ideal situation would be if demand for labor declines, as recent developments indicate. But Hof doesn’t expect major changes, even if the unemployment rate rises slightly.

– There continues to be good momentum in hiring, and hourly wage growth has been strong. Hoff says no major changes are expected in September.