February 4, 2023

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Inflation, base year and litigation – E24

There is a lot on the agenda in the second week of January. Both macro figures, the development of the Norwegian continental shelf in 2022, the oil conference in Sandefjord and the duo Chain and Widome who give their forecasts for this year.

MACRO-RUSH: Handelsbanken chief economist Marius Gunsholt-Hof is very excited about inflation numbers from the US next week and says he has a lot to say to the country’s central bank during the next interest rate meeting.
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On Thursday, the result of the US price increase in December will be announced. Handelsbanken chief economist Marius Gunsholt-Hof believes that the number will be important for future interest rate determination, but he does not expect any surprises.

Core inflation is widely expected to remain unchanged at 5.7 percent, he says.

The chief economist explains that monthly growth in December 2021 was particularly high, which means strong monthly growth in December 2022 means year-on-year growth will likely remain unchanged.

The chief economist notes that labor market numbers in December were stronger than expected, but wage growth was clearly lower than previously expected.

Hof believes that lower wage growth will make the US central bank tread more cautiously in the future.

– He said that the expectation turned out to be an interest rate increase of 0.25 percentage points at the next interest rate meeting.

This rate is lower than to date. Last year, the US central bank, the Federal Reserve, raised the interest rate several times with jumps of 0.5 percentage points or 0.75 percentage points.

inflation

At home, it is the GDP and inflation numbers that drive the shift.

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– Here at home, we expect core inflation of 5.7 percent, while on the mainland GDP is estimated at zero percent, says the chief economist.

The chief economist notes that inflation figures are important to Norges Bank’s interest rate path, i.e. how the central bank expects interest rates to develop in the coming years.

Inflation is important, because higher than expected inflation will lead to a higher interest rate path. Alternatively, if unemployment rose more slowly than expected, the central bank could slow its pace, says Hoff.

The chief economist assumes that there will be a hike in interest rates in March, but he believes that this will be the end of the rate hike this time.

– We believe that the Bank of Norway will stop after March, but this is not in stone and depends on the development of inflation and the development of unemployment, says Hoff.

He explains that these two main numbers are the ones that the Bank of Norway attaches the utmost importance to when setting the interest rate.

Survey lending and forecast duo

Handelsbanken’s chief economist believes that banks will continue to report lower demand in Norges’ lending survey, and that the outlook for the housing market in the next quarter is to the downside.

– The growth of housing prices has slowed down a lot, but still the price has somehow fallen off the peak, he says.

Home prices should fall as interest rates rise.

The Lending Survey is conducted by Norges Bank asking the largest banks in the Norwegian market every quarter about changes in the demand and supply of loans to individuals and companies.

The day before the survey, Oslo-based Handelsstands Forening received a visit from duo Olav Chen, Head of Allocation and Global Interest at Storebrand Asset Management, and Finance Minister Trygve Slagsvold Vedum. There they will look to the future and give their forecast for the Norwegian economy in 2023.

Energy Policy and Continental Shelf Symposium 2022

As usual, Sandefjord hosts an annual symposium on oil and energy policy, where a number of high profile figures participate.

Among them are Energy Secretary Terry Asland and Equinor CEO Anders Opedal, who will both be giving presentations. In addition, Erna Solberg and Sylvie Listaug will participate in a political debate.

On Monday, Oil Director Torgir Stordal presented Shelf Year 2022, a summary of the year that has passed in the oil and gas industry, as well as investment and production forecasts for the next five years.

What will be most interesting about the Shelf Year 2022 presentation are long-term investment estimates, a picture of where the oil industry will invest, and at what level in the next few years, says Hoff.

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In an earlier version of this case, Marius Gönsholt Hof is referred to as Chief Economist, but the correct title is Chief Economist. The issue was fixed on Jan 8, 2022 at 21.56.