Service industries dampened the GDP growth

New figures from the national accounts show declining economic activity in January. Value added in the wholesale and retail trade declined for the first time since April last year and was the main reason for the fall in gross domestic product (GDP) for Mainland Norway. There was a decline in several industries, including clothing stores. The decline should be seen in connection with the spread of mutated viruses and the subsequent closure of, among other things, shops in the Oslo region. Despite the decline, activity in the wholesale and retail industry was almost 2 per cent higher in January than in February 2020, which is the last month before the outbreak of the corona pandemic.

- The strict measures in the Eastern part of Norway were introduced in late January, and it may be that we will see the full effect of these in the February figures, says senior adviser at the National Accounts, Achraf Bougroug.

Since the infection control measures were tightened throughout the month, this may result in a negative carry-over into February.

- After the strong recovery last summer and early autumn GDP for Mainland Norway has developed relatively flat since October, Bougroug says.

Mixed picture in the Norwegian economy

Activity fell in several service industries. The decline was particularly pronounced in transport activities excl. ocean transport, accommodation and food service activities and arts, entertainment and other service activities. The development must be seen in connection with the increased infection in the new year and tightening of local and national infection control measures. Activity in these service industries was sharply reduced even before new year as a result of continuous contact-reducing measures. In total, value added in the service industries fell 1 per cent and was thus 5 per cent lower in January than before the pandemic broke out last spring.

Value added in other good production rose 0.5 percent and softened the decline in January. Construction went up, whereas traditional fishing and aquaculture saw a small decline.

Manufacturing and mining saw a relatively strong increase in value added in January, of 2.1 per cent. The rise was particularly strong in fish processing and the pharmaceutical industry, but production of machinery and equipment too saw a solid rise.

- The rise has led to manufacturing having brought back the entire fall from last spring. Value added is now higher than it was when the pandemic hit in March last year, says Bougroug.

Strict entry restrictions into Norway were introduced in the middle of the month, but foreign workers arrived already in weeks 1 and 2 of 2021.

Value added in general government fell 0.8 per cent in January. The development is primarily due to lower activity in local administration.

Oil and gas extraction fell about 1 per cent from December to January. Total GDP, i.e. including petroleum activities and ocean transport, fell 0.3 per cent from December 2020 to January 2021.

Consumption

Household consumption of goods fell 1.3 per cent in January. Purchases of cars contributed most to the fall, but also clothing and shoes pulled down sharply. Consumption of services fell 2.9 per cent, especially reduced by recreation and culture, restaurant and hotel and transport services. In total, household consumption fell 2.2 per cent in January.

Final consumption expenditure of general government decreased in the first month of the year, with negative contributions from both central and local government. 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

Gross fixed capital formation increased 0.5 per cent in the period November-January, compared with the previous three-month period. The development corresponds to a decline in the rolling three-month growth compared to the growth in December and November. The three-month growth in housing investment was 3.4 per cent in January, slightly down from December.

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.

Export and import

Exports fell 3.5 per cent in January, and were primarily pulled down by oil and gas exports, but also by traditional goods, including manufacturing products such as metals and workshop products.

Despite a flat development in oil production in January, exports of oil and gas fell sharply in January. The fact that the development in these do not perfectly correlate may be due to time lag between production and export, for example due to storage.

Imports fell 2.6 percent in January. Here, too, traditional goods declined, and especially car imports.

Trade in services fell sharply early in the corona crisis and, unlike trade in goods, has not picked up again. Imports of services increased in January, but despite recovery since summer, they were still just about 35 per cent lower than the level in February. The low imports of services is mainly due to lower travel, as Norwegians only to a small extent have been able to visit abroad. The same applies to the export of travel, since fewer foreigners have been able to visit Norway. Travel constitutes a smaller part of service exports than imports. Exports of services are estimated to be just over 10 per cent lower in January than in February 2020. Statistics Norway has less information on trade in services on a monthly basis, and the monthly figures are therefore more uncertain.

Revisions

In connection with new monthly figures, there will be revisions. The statistics used will not normally change backwards, but seasonally adjusted series can still be affected. This is a consequence of the fact that the basis for the seasonal adjustment changes when new periods are added. The National Accounts recently published an article on the revisions in the monthly national accounts.

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