According to Regional Network contacts, the Covid-19 outbreak and containment measures have led to a sharp fall in economic activity this spring. The oil price fall has contributed to amplifying the decline. Contacts expect a broadly unchanged activity level over the next half-year. Enterprises have substantially cut their investment plans, and they expect considerably lower wage growth than they did prior to the outbreak.
According to Regional Network contacts, activity has fallen at an annual rate of 5.3% over the past three months. By comparison, contacts reported a reduction of slightly below 3% during the financial crisis in autumn 2008. In some sectors, the decline has been so sharp that it drops below the scale used to measure activity by Regional Network contacts. There is therefore reason to believe that the real fall in output is greater. The decline is most pronounced in household services, but activity has also fallen substantially in commercial services, oil services and retail trade.
Household-oriented sectors expect a pick-up in activity over the next half-year. Commercial services are also expecting some growth. On the other hand, contacts expect weaker demand from export markets and the oil industry ahead, in addition to a fall in residential and private commercial building construction.
The outbreak has also resulted in a downward revision of investment plans, reduced capacity utilisation and lower employment. Contacts plan to increase employment over summer. The estimate for annual wage growth in 2020 has been revised down from 3.2% in February to 1.8% in May.
Source: Norges Bank / Norway Today