Moderate downturn in the Mainland Economy in November

New figures from Monthly National Accounts show that the tightening of control measures contributed to a fall in the economic activity in November. Negative development in less cyclically sensitive industries such as fishing and aquaculture, as well as production of electricity also contributed.

-Towards the end of October, the infection rate increased in Norway, and control measures were tightened. The effects of the measures first came to light in the November figures, says head of The Norwegian National Accounts, Pål Sletten.

The decline was strongest in the service industries, where activity was already significantly reduced, like accommodation, serving and culture. The activity in wholesale retail trade increased slightly, which can be a result of a shift in Christmas shopping from December to November. Black Friday was spread out to a week to consider infection control.

-Unlike in March, neither schools nor kindergartens were closed in November. The activity in health care was close to normal. In combination with an increase in wholesale and retail trade and a good development in manufacturing, this resulted in the decline being relatively small in November, says Sletten.

Fishing and aquaculture fell in November, from an unusually high level in October. Seasonally adjusted electricity production also decreased. Excluding the contributions from these two industries, the decline in GDP for mainland Norway was approximately 0.4 per cent.

Oil and gas extraction increased again in November, after being significantly reduced in October as a result of strikes and maintenance shutdown. Total GDP, including extraction, pipeline transportation and ocean transport, only decreased by 0.1 per cent in November.

New decline in service industries

As a result of stricter control measures, activity in the service industries fell by 0.7 per cent in November. Serving and accommodation saw the largest monthly decline and contributed to the slowdown in overall economic growth. The same goes for passenger rail transport and arts, entertainment and other service activities.

Retail trade has seen growth since April and the activity level in November was over 4 per cent higher than in February. Recommendations to start Christmas shopping early contributed to increased activity in the industry in November as well. As a result, wholesale and retail trade was among the industries with sustained growth and contributed positively to the total growth in November.

Production of other goods fell by 5.5 per cent in November. Fishing was among the industries that slowed down growth.The decline in November followed very high production levels in October, which was caused by the late mackerel fishing. Despite a positive twelve-month growth, the seasonally adjusted production of electricity fell in November and thus contributed negatively to the monthly economic growth.

Manufacturing and mining grew by 1.3 per cent in November. The largest contributions were coal- and refined petroleum products, chemical products and mining.

Activity levels in public administration was about unchanged from October.

Consumption

As a result of tighter control measures in November, household consumption decreased by 1.4 per cent. Consumption of services slowed down growth, while consumption of goods increased growth but it did not make up for the decrease in consumption of services. Total household consumption was 6.9 per cent lower in November than before the pandemic hit.

Consumption of services decreased by 3.8 per cent in November and is slowed down significantly by hotel and restaurant services. Stricter restrictions on serving of alcohol and increased infection rate has resulted in a strong decline in the consumption of hotel and restaurant services. The decline is the largest since April. Transport services also contributed to slow down growth, which can be a result of more people working from home in November. The consumption of services was about 14 per cent lower in November than in February.

Consumption of goods increased by 1.5 per cent in November. Audio-visual, photographic and information processing equipment as well as furniture and furnishings were the largest contributors to the growth. The positive development in consumption of goods can be due to a change in Christmas shopping from December to November as a result of recommendations from the government regarding earlier Christmas shopping. E-commerce increased especially in November. This can be in relation to the fact that more people did their Christmas shopping online due to infection control, and earlier than usual to make sure the packages arrived in time for Christmas.

Final consumption expenditure of general government was almost unchanged from October. Developments in final consumption expenditure of general government are based on various indicators but will be revised when accounts for the central government and municipalities for the fourth quarter become available. These figures must be regarded as preliminary. Given the unusual circumstances, there is greater uncertainty.

Investments

In the three-month period from June-August to September-November, gross fixed capital formation increased by 3.1 per cent, despite an estimated decline of 2.2 per cent from October to November. Dwelling services increased by 1.6 per cent in the same three-month period and was unchanged between October and November.

For gross fixed capital formation there is generally weak access to sound monthly information. For petroleum investments, investments in manufacturing, mining and power supply, information on planned investments as reported by the companies has been used.

Exports and imports

Both exports and imports of traditional goods fell in the beginning of the pandemic outbreak, but by the end of the summer both were back at February levels in fixed prices. Following good but decreasing growth since July, exports of traditional goods decreased by 3.8 per cent in November. Refined oil products was the largest negative contribution, and apart from this, traditional goods grew in sum. Several manufacturing products, especially metals, contributed positively. There was strong growth in imports of traditional goods, at approximately 7 per cent from October. Increasing imports of manufacturing products, especially cars, contributed positively to the growth.

Foreign trade in services fell drastically early in the pandemic, and unlike trade in goods, has not recovered. In November there was further decline, and despite good recovery since July, trade in services was still more than 30 per cent lower than levels in February. The decline in imports of services since March is particularly caused by lower imports of transport services, since Norwegians have had little opportunity to travel abroad. The same applies to exports of services, as fewer foreigners have been able to travel to Norway. Thus, exports of transport services have declined as well. Transport services are, however, a smaller portion of exports than of imports. Exports of services are thus projected to be approximately 13 per cent lower in November than in February. There is less available information on trade in services on a monthly basis, thus, monthly figures are less certain.

Excepting April and August, oil exports have seen a positive development since February. Despite an increase in production, oil exports decreased in November. This could be because of a time lag between production and registered exports. Exports of natural gas, however, increased in November. In sum, petroleum exports declined by 3.8 per cent in November.

Total exports of goods and services decreased by 2.6 per cent in November, while total imports grew by 3.0 per cent. Total exports were around 5 per cent below the level in February, while total imports were 7 per cent lower than in February. Thus, the balance of trade in goods and services has strengthened since February, despite the development in November. Meanwhile, prices have declined for several important exported goods. The oil price is particularly important, but the price of electricity has also been low. This has been counteracted somewhat by a weakening of the Norwegian Krone, but this has also increased the prices of imports, measured in NOK. Consequently, the balance of trade in goods and services has weakened significantly in current prices. In the 3rd quarter, we had the largest quarterly deficit in foreign trade of goods and services since 1981.

Revisions

In connection with new monthly figures, there will be revisions. The statistical sources used will usually not be changed for previous months, but seasonally adjusted series can still be affected. This is caused by the basis for the seasonal adjustments changing when data for new periods are added.

In the current situation, the uncertainty is greater than normal. Revisions are therefor to be expected, also due to potential changes in the underlying data for previously published months.

In some areas, new statistical sources have been incorporated for previous months. With the publication of figures for November 2020, the macroeconomic picture remains unchanged for the 3rd quarter.