‘Kroner’ fell again on weak orders

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It was costing nearly eight Norwegian kroner to buy one US dollar Tuesday morning, after the country’s newly battered currency slumped against most others’ once again. This time it wasn’t entirely the price of oil that set off the decline.

It's up to Norges Bank to decide what's printed on Norwegian currency. PHOTO: Views and News

The value of Norway’s currency fell again this week, after reports of lower ordering and hiring activity. The country’s central bank board is also expected to finally lower interest rates later this month. PHOTO: newsinenglish.no

After years of record strength, bolstered by a robust economy, Norway’s currency has been hammered by last year’s dive in oil prices. Since bottoming out last winter, though, the price of a barrel of North Sea crude has risen and it ended trading slightly up again on Monday, at around USD 65.

The krone fell nonetheless, but economists say the current slide is more related to how the oil price decline is now seeping into other portions of the Norwegian economy. On Monday, the Norwegian federation for purchasing and logistics (NIMA) and Danske Bank published a new monthly measurement of how purchasing chiefs around the country foresee ordering activity in the months ahead by companies and industries. Their new so-called PMI-index showed a marked decline from April to May.

Orders were especially weak within Norway, “and point therefore clearly in the direction of the oil industry slowdown among business in general,” stated Svein-Egil Hoberg of NIMA. He noted that employment activity also indicated a staffing decline among companies, in line with the recent rise in unemployment.

“The question is how deep and how long-lasting this will be,” Frank Jullum, chief economist of Danske Bank, told Norwegian business news website E24.

Jullum noted that the PMI-index has been slipping since February. He was, though, reluctant to claim that the index signals a slowdown for Norway’s mainland (as opposed to offshore oil and gas) economy. That’s because the service sector in Norway is so important in the country’s overall economy.

Newspaper Aftenposten reported that other assessments of economic activity in recent months, however, show a mainland slowdown. State statistics bureau SSB (Statistics Norway) predicted earlier this spring that growth within the mainland economy would decline by half, from 2.3 percent during the past two years, to just just 1.1 percent this year. The regional network of Norway’s central bank (Norges Bank) has also reported lower production growth with further declines expected. The government also reduced its economic growth forecasts in its revised national budget, but neither the finance minister nor the central bank’s governor foresee any crisis in the Norwegian economy.

Norway’s GNP is now expected to grow by 1.25 percent this year and 2 percent next year. Predictions are also rising, meanwhile, that the central bank will finally lower its key lending rate when the board meets for the last time before summer holidays later this month. That will likely prompt another decline in the value of the krone. Norwegians were being warned once again this week that any summer holidays abroad would be more expensive this year, regardless, and that prices of imported items would rise.

newsinenglish.no/Nina Berglund

  • frenk

    Mmmm….further ‘financial’ punishment for Norwegians….can’t afford to live here with oil….can’t afford to live here without oil……!
    If Stoltenberg and ‘his gang’ had started to modernize this economy and culture a decade ago….I believe this economy would be much more robust and the average Norwegian family would have a much higher standard of living.

    • inquisitor

      Wouldn’t have building a gas refinery or two to supply Norway not only with its own gas supply, but to sell to others been a good idea? Would have brought some jobs as well.

  • Big H

    The weakness in the NoK is greater highlighted against the over and falsely inflated UK pound & US dollar – these figures will change soon as the norwegian economy is based on true figures & not over valued market in the UK

    • frenk

      …sorry….but the Norwegian economy is ‘massively overvalued’…..take a dollar…and see what you can buy with it in the US…the UK…and then Norway….

      • Big H

        The norwegian economy is ‘massively over taxed’. I have posted a 2nd comment waiting on approval! Norway has a huge financial nest in the ‘oil fund’ where as UK / USA are only drowning in debt due to earlier overspending – both these economies are overvalued

        • frenk

          Mmmm…the average UK family owns more than $60,000 of assets….the average Norwegian family owns less than $8000 of assets….and, the average Norwegian family has more than twice the debt of a UK family…the numbers speak for themselves…..essentially Norwegians have this ‘romantic belief’ that they are wealthy….but wealthy people don’t eat hotdogs and frozen pizzas….

          • inquisitor

            So all these shiny new cars I see everywhere are not typically paid for outright? I hardly see old junkers being driven around except in winter.

            • frenk

              Mostly bought on finance deals or leased….it doesn’t make financial sense to actually buy a car in Norway…I lease my car….about $1000/month…I ‘write-off’ the cost as a business cost….

  • Big H

    How is that a country like Norway with financial wealth & stability can be showing signs of weakness (NoK) versus countries who are in huge financial debt and are today showing signs of strength (GBP / Dollar) – economists absolutely NO IDEA !!

    • frenk

      The Norwegian economy is ‘rotten at the core’….without oil and gas…this is a ‘failed economy’…..as we see now….rising unemployment…soon you will see the bankruptcies start to rise and if the oil price does not rebound soon (which it won’t) your GDP figures will collapse….the UK and US economies are growing ‘very nicely’ at the moment…this will continue even faster if the oil price stays low.

      • Big H

        Sorry frenk – you are singing the same song the UK & US want to hear – propaganda – these economies are still heavily in debt! NHS workers have not had a payrise in 6 years & staff are told to supply there own paper & pens. The public sector is totally stagnant and this has a direct relation to poor government economy & funds – but hey they keep saying how well we are growing – maybe from the outside, but from the inside the system is rotten to the core

        • frenk

          In ‘real terms’ the UK economy has been in ‘state of flux’ since the 2nd World War….the ‘enormous and wealthy’ middle class in the UK today has just voted in a Conservative government who will squeeze councils and public services as much as possible. The public debt is manageable as long as the economy grows and ‘sensible’ spending decisions are made over the next decade. I’m certainly not worried….since the 80’s…quality of life in the UK has improved dramatically…thanks to free markets economic reforms that really started in the 1960s….

      • inquisitor

        Is Norway due for a housing bubble collapse like the US began to experience in 2005?
        Many houses in the US are still 50% of their 2005 inflated values.

        • frenk

          They say (the OECD) that house prices in Norway are overvalued by at least 40%…..
          Give it 3 to 6 months….as people in rented accommodation (like myself and my Portuguese neighbor) move away from Norway…people will start to get desperate…and the banks will start to move in to repossess…

  • Big H

    Euro / GBP / Dollar should all be chasing The Norwegian economy – Stoltenberg and his gang had great foresight and Norway should still be proud & strong – but WHY are norwegians being warned – where is the ‘OIL FUND’ wealth in this so called down turn – is the oil fund only a pot of money or is it there to strengthen the economy in times of failings – C’mon Norway show your strength….

  • Leo

    Norway is in for a very rough ride. Just look at the country in historical terms. Before the oil markets developed in the 70s Norway had an economy half the size of Sweden and about on par with Greece. Oil is the reason we’ve had record economic growth, low unploymemt and a generous state benifits. Things are going to have to change. Oil prices are going to stay low due to the explosion of US shale, so oil companies in NO are going to have to cut cost by laying off workers. The Kroner is going to weaken against other currencies because we’ll have to cut interest rates to try and spark investment. This will lead to higher prices at the stores since Norway imports most of its products especially food. This will lead to lower consumption putting further strain on the economy. It’ll be a bumpy ride getting off oil and developing new industries.