– Indicates that we will witness a recession – E24

– Indicates that we will witness a recession – E24

SpareBank 1 SR-Bank has caught up with the business world in southern Norway: – The pessimism is greater than I thought, says the chief economist.

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Sparebanken 1 SR-Bank's economic barometer collects the forecasts of 600 companies in southern Norway.

When the leading index is below 50, more than half of companies believe there will be an overall decline.

The leading index for next year is 46.

Aside from the pandemic, this is the lowest level the bank has measured in the 10 years the measure has been running.

– Long ago in 2022 and 2023, we were surprised by how well companies managed difficult times. However, I now think that the pessimism is greater than I thought, says Sparebanken 1 SR-Bank chief economist Kyrre M. Knudsen.

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Knudsen says he's “very concerned” about business in 2024. Figures show interest rates and rising costs are hitting hard and businesses have a bleak outlook for next year, he says.

These numbers indicate that we will witness a recession in 2024, that is, negative growth for two consecutive quarters. This doesn't happen often. We had a mini-recession during the pandemic, but we have to go back to the financial crisis in 2008 to find the previous one, Knudsen says.

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It is believed that the recession will come in the first and second quarter of 2024.

Norway Mainland GDP Mainland GDPGDP, excluding income from oil operations and international shipping. It rose by 0.1 percent in the third quarter of 2024. In October, a slight increase was also seen.

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– Press cut

However, Knudsen sees some optimism in his economic measure. The companies say they will keep their employees. The Employee Index shows that there are almost as many companies intending to hire as there are companies that are downsizing.

– That's the good news about this barometer. There is likely to be a steady development in the labor force, and there is no sign of a significant rise in the unemployment rate, as many had feared, comments Knudsen.

The unemployment rate rose marginally in December from 1.8 to 1.9 percent. As shown by the numbers from Nav, this was fully in line with Norges Bank's forecasts.

However, Knudsen thinks it's strange that more companies aren't downsizing. He believes one reason may be that employers will delay dismissals as long as possible.

– We must realize the combination that business owners want to retain their employees at the same time when profitability prospects are poor. Knudsen says companies will likely come under more pressure to reduce headcount.

more accurate

In mid-December, Norges Bank published its report from the regional network.

The report is issued four times a year and consists of interviews with managers from more than 400 companies and organizations about economic development and future prospects.

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This is how the Central Bank opened the report for the fourth quarter of this year:

– Companies in Norges Bank's regional network expect overall activity to remain unchanged in the fourth quarter, then decline at the beginning of next year.

The report showed that the economy has slowed and that inflationary pressures have eased.

Knudsen believes their business cycle measure gives a more accurate picture, as they distinguish between provinces and industries to a greater extent. The Sparebanken 1 SR-Bank business cycle measure also has a longer time horizon.

“In our measure, for example, you don't see any signs that the construction industry will rebound during the year,” he says.

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Big differences

Rogaland is first and foremost on the business cycle scale.

– This is therefore related to a large proportion of energy companies in Rogaland, which have higher growth expectations than other industries in the coming year. In particular, there are expectations for more high-profile appointments, says Knudsen.

Industries involved in export have benefited well from the economic turmoil and weak krone, while industries such as the construction industry have suffered.

Sparebanken 1 SR-Bank's business cycle barometer also shows this.

Dalila Awolowo

Dalila Awolowo

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