Steady recovery in the Mainland economy continues in October

After the first shutdown in March, GDP for Mainland declined drastically, and was 11 per cent lower in April than in February, according to Monthly National Accounts. Activity grew significantly towards the summer, but the growth rate declined somewhat in the 3rd quarter, fluctuating around 1 per cent monthly. New figures show that the recovery continued in October.

- The monthly growth in the Mainland economy in October was quite similar to September, says Pål Sletten, head of The Norwegian National Accounts. Besides traditional fishing, the picture shows continued recovery at around the same pace as before.

- Towards the end of October, the infection rate increased in Norway, and control measures were tightened. As this happened so late in the month, we do not see any impact in the figures.

Oil production in October was affected by strikes and maintenance shutdown in some oil fields. Adjusted for regular seasonal fluctuations, petroleum extraction fell.

- The impact in the oil industry was large enough that total GDP, where oil and ocean transport is included, decreased by 0.7 per cent in October.

Mixed development in service industries

Accommodation and food service activities, arts, entertainment and recreation, and other service activities, as well as transportation activities excluding ocean transport experienced the largest percentage-wise downturns at the start of the Corona pandemic. These industries saw strong growth in May and June as pandemic control measures were loosened. In July the growth declined, while in August and September economic developments were mixed. Several measures were lifted in the first half of October. Restrictions on outdoors events with crowds up to 600 people were allowed under certain circumstances, serving of alcohol at midnight was no longer prohibited. The activity in serving and accommodation as well as entertainment and recreation thus increased in October. Despite this, activity levels were still lower than in February. The production in administrative and support service activities also experienced significant recovery. The industry had a large and prolonged decline after the pandemic hit. Despite seeing a positive development since august, the level was still far below February. Wholesale and retail trade has increased since April and the growth continued in October. Retail trade is among the service industries that has caught up with the activity levels of February.

Production of other goods increased by 3.4 per cent in October. Fishing and aquaculture contributed significantly. Aquaculture experienced strong growth in September, and activity remained high in October. In addition, traditional fishing saw strong growth in October, adjusted for regular seasonal fluctuations. This was particularly caused by mackerel fishing taking place somewhat later than earlier years. Besides fishing, production of electricity contributed to the monthly growth.

Manufacturing and mining grew by 2 per cent in October. The largest contributions were production of electrical equipment and production of pharmaceutical products as well as chemical raw materials.

The activity in public administration increased by 0.2 per cent. However, the growth is somewhat dampened by relatively low activity in the health trusts.

The oil industries reduce total GDP

Extraction of crude oil and natural gas has risen since July, but growth slowed somewhat down in September. Adjusted for normal seasonal fluctuations, activity in the industry fell by just under 10 per cent in October, thus making a strong negative contribution to total GDP. The Norwegian Petroleum Directorate points out that strikes and downtime in some fields reduced production. Services related to oil and gas extraction, on the other hand, grew by just under 2 per cent.

Consumption

Household consumption decreased by 0.1 per cent in October and was 6 per cent lower than in February. Consumption of goods decreased while consumption of services increased.

Consumption of goods fell by 1.1 per cent in October, which is mostly due to a decline in operation of personal transport equipment, electricity, clothing and footwear. The fall in operation of personal transport equipment is due to the high levels in September. Nevertheless, consumption was approximately 9 per cent higher in October than before the pandemic hit. Consumption of food and alcoholic beverages rose in October and were the largest positive contributors. These consumption categories have generally seen significant growth the past months, and the consumption levels are higher than in February.

Consumption of services increased by 1.6 per cent in October. Despite having experienced growth for six consecutive months, the consumption level was approximately 10 per cent lower than before the pandemic. The growth is mainly caused by an increase in recreational and cultural services.

Final consumption expenditure of general government increased by 0.9 percent in 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

Following a growth rate of 5.2 per cent in September, the growth in gross fixed capital formation declined in October, at a modest monthly increase of 0.6 per cent. On a more detailed level, the picture was more varied, with a 1.5 per cent decrease for gross fixed capital formation in Mainland Norway. Investments related to the oil extraction and ocean transport industries saw an overall growth of 10.2 per cent.

For investments in fixed capital, 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 at the beginning of the pandemic outbreak, but by the end of the summer both were back at February levels in fixed prices. In October exports of traditional goods grew by 0.7 per cent. Electricity and fish contributed to the growth, while exports of industrial products decreased. Imports of traditional goods grew by 2.3 per cent in October, particularly due to large imports of refined oil products.

Foreign trade with ships, platforms and planes is more volatile. Imports of such goods fell significantly in October. This was caused by large levels in September, as The Norwegian Armed Forces received three new combat aircrafts that month.

Foreign trade in services fell drastically early in the pandemic, and unlike trade in goods, has not recovered. Despite good projected growth in October, trade in services was still more than 30 per cent lower than levels in February, measured in fixed prices. 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. Exports of services have also been significantly lower since March, as foreigners have not been able to travel to Norway like normal. Thus, our exports of travel services fall. Transport services are, however, a smaller portion of exports than of imports. Exports of services are thus projected to be approximately 14 per cent lower in October than in February, in fixed prices. There is less available information on trade in services on a monthly basis, thus, monthly figures are less certain.

Oil exports have developed relatively well since February. Excepting April and August, monthly exports have increased. Good growth was reported for crude oil in October, despite production falling. This could be because of a time lag between production and registered exports. Exports of natural gas, however, fell somewhat, giving a total growth in petroleum exports of 0.6 per cent in October.

Measured in fixed prices, total exports of goods and services increased by 1.5 per cent in October, while total imports grew by 1.6 per cent. Total exports were still 2 per cent below the level in February, while total imports were 9 per cent lower than February. The balance of trade in goods and services is thus significantly strengthened, measured in fixed prices. Meanwhile prices have declined for several important exported goods. The oil price is particularly significant, 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 on imports, measured in NOK. As a consequence, the balance of trade with goods and services is significantly weakened 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 October 2020, the monthly growth in Mainland Norway's GDP in September was revised up from 0.6 to 0.7 per cent.