Economic Survey 3-2005

The cyclical upturn in the Norwegian economy has continued with undiminished momentum through the first half of 2005, and we expect the upturn to continue to the end of the year and perhaps into the beginning of 2006. The main driving forces behind the upturn have been petroleum investment and an expansionary monetary policy, with low interest rates that have stimulated household consumption and housing investment. There are still no signs of labour market pressures in spite of the cyclical upturn, which probably reflects the recent increase in average working hours partly owing to a fall in sickness absence. Consumer price inflation remains low, but will edge up in the period ahead as a result of higher energy prices. The krone exchange rate has appreciated again, reflecting high oil prices, relatively low inflation in Norway and the interest rate differential in relation to the euro area which has turned positive again.