Households are still under pressure, due to the earlier uptick in inflation and higher interest rates. The situation is fragile, but with upcoming rate cuts, a significant decline in household consumption will be avoided.
In the past decade, Norway’s relative global excellence has weakened. As a result of the drop in oil prices in 2014, Norwegian interest rates approximated the levels of our trading partners, and the NOK weakened from very strong levels. After the pandemic the fact that other central banks hiked rates more than Norway in order to curb inflation added fuel to the fire. Maybe it is boring that interest rate differentials and the NOK exchange rate are related, but maybe it is not that strange.
Economic data has been weaker in all the major economies during the summer and labour markets are weakening. This could encourage China to ease fiscal policy further, and the western central banks are expected to cut rates.
Nordea's Chief Economist: Europe to become a growth driver
The modest growth that has long characterised the global economy continues. But much indicates that growth will increasingly be driven by Europe. There are prospects of rate cuts in most countries, but the persistently high inflation requires very careful timing and dosage of monetary policy easing.
The Finnish economy has underperformed the rest of the eurozone over the past two years. Private consumption has gone down in Finland, as higher interest rates have hit households hard. However, most of the gap to the rest of the eurozone is due to the sharp decrease in residential construction in Finland.
We saw the first positive signs for the Finnish economy in the first half of the year. The gradual recovery in consumer purchasing power and lower interest rates are expected to send the Finnish economy back on a growth track.
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