Norway is once again being branded as fundamentally different from the rest of the world, as it emerges from the Corona darkness. While its own Corona virus crisis initially hit hard, infection and death rates have remained low and now the economy is showing numerous signs of recovery.
In the past week alone, more people have returned to work, the Oslo Stock Exchange has closed on the upswing and Norway’s currency, the krone, has strengthened considerably against the US dollar. On Tuesday it cost NOK 9.56 to buy one US dollar. It cost as much as NOK 11 earlier this spring.
Then came retail sales statistics for April, released last week, showing that Norwegians have never shopped as much as they did during the depths of the Corona crisis. State statistics bureau SSB (Statistics Norway) put forth numbers that all but shocked even Norwegian economists. Most had expected a moderate downturn when Norwegians were told to stay home. SSB’s report, however, showed a strong upturn of 4.8 percent for the month compared to March.
“This is surely a sign of how Norway is annerledeslandet (a very different country from most others),” Kjersti Haugland, chief economist for DNB Markets, told newspaper Dagens Næringsliv (DN). While consumption has taken a dive elsewhere around the world, it jumped in Norway.
Haugland claimed that the dive in international consumption isn’t as much pegged to loss of income as to how “people have been hindered from consuming.” Overall uncertainty has also made most people hesitate before shopping.
‘More robust’ starting point
Norway’s numbers thus indicate that Norwegians “have reacted very differently,” Haugland said, reflecting the fact that the economy has long been “more robust” in Norway than in many other countries. “Consumers feel confident that they don’t really face economic ruin,” she told DN. “That’s good news for the economy as a whole.”
The retail spending surge in April can also reflect how Norwegians are buying more goods and fewer services. Many stores have also remained open during the entire Corona crisis that prompted the government to otherwise shut down restaurants, bars, schools, day care centers and service-oriented businesses and government offices. Grocery stores, meanwhile, have been booming as has Norway’s liquor and wine monopoly Vinmonopolet. Consumers are spending more on gourmet-type foods, too, clearly feeling a need to treat themselves to something special when they couldn’t go out. Home remodeling firms, building supply companies, florists and gardening businesses have also shown strong sales as Norwegians seize the opportunity to embark on home improvement projects.
Retail sales also rose in March, up 0.9 percent from February, while they fell 11.2 percent in the euro zone. “That shows how the degree of the depression hasn’t been as great in Norway as in the rest of the world,” Haugland said.
Unemployment the biggest concern
Concerns within Norway’s retail trade are by no means fully relieved, she cautioned, because overall consumption of both goods and services hasn’t increased, and unemployment is widely expected to remain high by Norwegian standards. Online retail sales also increased the most, meaning that “bricks and mortar” stores remain threatened along with commercial real estate.
Other economists agree, and point to rising unemployment as the main threat. Kjetil Olsen, chief economist at Nordea Markets, believes the Norwegian economy has bottomed out “and recovery has begun,” but wrote in Nordea’s latest economic outlook last week that unemployment remains at 7.5 percent and will likely settle at between 5-6 percent this summer. It may become more difficult to get some laid-off workers back into the job market.
Øystein Dørum, Haugland’s predecessor at DNB who’s now chief economist at national employers’ organization NHO, expects high unemployment and said at NHO’s own economic outlook presentation last week that Norwegians need to keep spending in order to prop up economic activity.
That’s why the retail sales figures for April were encouraging. Olsen also notes how Norway is in a unique situation because it could cut interest rates and dip into its huge sovereign wealth fund known as the Oil Fund. It’s supposed to fund pensions for future generations, but the government has won broad support for raiding it right now to fund its massive economic relief and stimulus packages that have often been even further enhanced in Parliament.
NHO’s survey of business owners all over the country, meanwhile, showed that 43 percent think they’ll be “back to normal” within the next next year. The so-called “April darkness” pegged to uncertainty and as many as 400,000 Norwegians suddenly without work is already being replaced by optimism.
“We see optimism among our members, and I was really glad when I saw the numbers,” NHO boss Ole Erik Almlid. Fully 70 percent of business owners polled predicted higher revenues and more employees five years from now.
Bård Bjerkholt, commentator in DN, headlined his wrap-up of recent economic predictions as “The downturn that disappeared.” The upturn now beginning may be just as steep as the decline was, after the majority of Norwegians who did not lose their jobs were all but forced to save. “There’s a limit,” Bjerkholt wrote, “on how much you can spend when you have to stay home.” Now restrictions are easing, folks are heading out more often and they’ll spend more money.
Higher oil price helps, too
Oil prices have also risen, with a barrel of Norway’s North Sea Brent crude selling for nearly USD 38 a barrel as this week began. That’s double its low point when the crisis first hit, and Bjerkholt notes that the oil industry is “less important than it was before.” When oil prices fell in 2014, oil investments accounted for more than 8 percent of the mainland economy in Norway. Now that’s down to 6 percent. “And even though the oil industry directly and indirectly employs around 220,000 people, that’s 105,000 fewer than in 2014,” Bjerkholt wrote, just days before the Parliament is likely to nonetheless offer tax relief to controversially encourage more oil investments.
Bjerkholt notes that Norway’s tourism industry and service sector, however, still face hard times ahead. Sparebanken Vest, which bases its banking business in Western Norway where both the oil and tourism industries were clobbered by Corona, reported a dive in its own index released last week. It’s based on a poll of 700 companies in Vestlandet and the hotel, restaurant, shipping, transport and storage branches came out worst. Only marginal improvement is expected during the next six months. That helps explain why Prime Minister Erna Solberg, who hails from Bergen, and her government have extended aid and economic stimulus packages, at least through August 31.