Fall in mainland-GDP in the 1. quarter

After an uneven development through the 4. quarter of 2020, economic activity decreased throughout the 1. quarter. Increased spread of the virus and consequent restrictions had a large effect on activity, especially in Oslo and surrounding countries.

- The fall in the activity was broad, but against a backdrop of an economy that is affected by the restrictions unevenly, says section chief for the National Accounts, Pål Sletten.

In parts of the private sector, activity in the first quarter was back at about the same level as before the pandemic hit Norway in March 2020. This applies to the manufacturing sector, which has seen a relatively steady rise from last summer until January 2021, followed by a fall in activity in February and March. In the hardest hit service industries, on the other hand, production at the end of last year was 20-40 per cent lower than before the pandemic, and in the 1. quarter, the fall continued. The service industries alone reduced GDP for mainland Norway by 1.2 per cent in the 1. quarter.

- As we have seen before, it is the service industries that depend on physical contact that are most affected when the measures to stop the spread of the virus are implemented, Sletten says.

Mainland Norway's GDP was 2.0 per cent lower in March 2021 than in December 2020. In comparison, mainland Norway's GDP fell by 10.4 per cent from February to April 2020, during the first wave of contagion. The decline was much smaller this time, partly because activity in many of the service industries was already significantly reduced, and partly because infection control measures were now more targeted. The measures were to a greater extent local than national.

- To some extent, this quarter’s development also reflects that the economy has adapted to the infection control measures, Sletten says. Although activity fell, the decline in many industries was far less now than in the spring of 2020.

The fall in total GDP was moderated by an increase in oil and gas production of 1.5 per cent in the 1. quarter. Total GDP, including oil and gas extraction and shipping, thus fell by only 0.6 per cent. However, the price of oil increased by over 47 per cent from the 4th to the 1. quarter, and this led to GDP in current prices rising by as much as 5.8 per cent.

- Total Norwegian GDP, including oil extraction, increased by as much as NOK 50 billion from the 4. to the 1. quarter due to the rise in oil prices. This illustrates how important oil prices and oil production are for national income, says Sletten.

The service industries were affected the most

The service industries contributed most to the downturn in the mainland economy. In total, accommodation and catering activities, culture, entertainment and other services, and transport excluding foreign shipping accounted for about half of the total decline in mainland GDP in the 1. quarter of 2021.

The retail trade is one of the service industries that has done well throughout the pandemic, but in the 1. quarter production also fell here. The infection control measures were gradually tightened in January, and shops in several municipalities in Eastern Norway were closed starting 23 January. Activity in the retail trade fell by as much as 4.1 per cent in January. The fact that the retail trade normally declines in January has been accounted for, and if one also includes this normal decline, the fall was as much as 18.3 per cent. Overall, gross domestic product was 2.7 per cent lower in the 1. quarter than in the 4. quarter. Nevertheless, the level in March 2021 was still higher than in February 2020, before the pandemic hit.

Production in the category “production of other goods”, which includes the primary industries, electricity production and construction, increased by 0.7 per cent from the 4. to the 1. quarter. Fishing and aquaculture declined after a relatively good last quarter in 2020. This was more than offset by growth in the power industries and construction of 1.5 per cent and 0.8 per cent, respectively.

The quarterly growth of 1.1 per cent in manufacturing and mining significantly dampened the decline in mainland Norway's GDP and was broadly based. Manufacturing has had a steady increase in production since last summer, but this development turned to a decline in both February and March this year. While activity in the consumer-driven and export-oriented industrial industries in March was above the level in February 2020, activity in the industries tied to the oil and gas is about 7 per cent lower, despite moderate growth in the first quarter.

Like the manufacturing industries tied to the oil and gas, activity in services incidental to to oil and gas extraction grew in the first quarter, by 2.3 per cent, driven by activity related to production and exploration drilling.

General government output made a significant contribution to the overall decline in mainland GDP in the 1. quarter. Lower activity in the hospitals contributed to this.

Total GDP for Norway, including oil and gas extraction, pipe transport and foreign shipping, fell 0.4 per cent in March and 0.6 per cent in the 1. quarter.

 

Decline in both consumption of goods and services in households

Household consumption fell by 3.9 per cent in the 1. quarter of 2021, and was about 10 per cent lower in March 2021 than in February 2020.

Household consumption of goods fell for the first time since the 1. quarter of 2020. Closures of shops in a number of municipalities in Eastern Norway explain much of the decline. Consumption of durable consumer goods fell by as much as 11.6 per cent. Consumption of goods is still at a high level: about 6 per cent higher in March than before the outbreak of the pandemic. This is largely thanks to online shopping: since the first quarter of 2020, online shopping in calendar-adjusted volume has grown by more than 50 percent.

After stagnating in March, service consumption fell by 5.0 per cent in the 1. quarter, after a decline in the first two months of the year. In March, service consumption was 15.0 per cent lower than before the pandemic. It was mainly industries affected by infection control measures, such as leisure services, hotel and restaurant services as well as passenger transport, that contributed to the decline.

Consumption in public administration, including both central and local government, fell by 1.5 per cent in the 1. quarter of 2021. The pandemic also plays a role here: for the former, lower activity in hospitals, while in the latter there are many municipal services, such as museums and libraries, with greatly reduced activity.

Gross investment fell in the first quarter

In the 1. quarter, gross investment fell 1.6 per cent on the mainland and 1.7 per cent including the extractive industries. The picture is mixed: manufacturing and mining and production of other goods both had a growth of about 5 percent. In the latter, the entire increase is due to an approximately 30 per cent investment growth in the distribution of electricity. Investment declines in the service industries and recovery contributed to the overall decline. In the latter, production and exploration drilling dampens the fall.

Investment in housing by households fell 1.0 per cent in the 1. quarter after 4.6 per cent growth in the 4. quarter of 2020.

Lower trade volume

Seasonally adjusted volume figures showed a decrease of 2.9 per cent in exports from the previous quarter. The largest fall is in goods in January, while in February both goods and services grew. In March, exports of goods grew while exports of services declined.

Exports of traditional goods such as metals, fish and fish products increased by 2.1 per cent, thanks to a strong March. Growth could not offset lower exports of oil and gas, which fell 8.3 per cent due to a large fall in January. The high oil price nevertheless results in a growth in total goods exports at current prices of 22.8 per cent. Exports of services showed a slight decline in volume in the 1. quarter: low activity in travel is an important reason with a quarterly decline of about 30 per cent.

For imports as a whole, there was a fall of 5.7 per cent, with the entire decline being from January, while both February and March saw weak growth. The decline in imports was broad, but with some exceptions: product groups such as non-competitive imports and data and electronics dampened the decline in imports in the 1. quarter.

Measured in current prices and non-seasonally adjusted figures, the trade surplus increased from approximately NOK 10 billion in the 4. quarter of 2020 to NOK 70 billion in the 1. quarter of 2021.

Lower employment and hours worked

Seasonally adjusted figures show that the number of employed persons fell by 0.3 per cent, or just over 8,500 people in the 1. quarter, after an increase of 0.9 per cent in the 4. quarter last year. The industry that contributed most to the decline in employment in the 1. quarter was accommodation and catering. Culture, entertainment and other services also reduce employment. In the health and care industry, the number of employed persons grows by 1.0 per cent, and that industry as a whole attracts employment the most.

The number of non-resident employees has fallen, and according to recently published labour statistics, it fell by 21.8 per cent in the 1. quarter of 2021 compared with the same quarter last year. The decline was greatest for accommodation and catering activities and business services, where the staffing agencies are located. Travel restrictions may have contributed to the development, but it cannot be ruled out that this also reflects the general fall in activity in these industries.

Revisions

In connection with new monthly and quarterly figures, there will be recurring revisions. The statistics used will not normally change back in time, but seasonally adjusted series can still be affected. This is a consequence of the fact that the basis for seasonal adjustment changes when new periods are added.

In some areas, new basic statistics have been incorporated for previous months. The macro picture is still as previously published.