Energy sector putting strain on Norwegian economy

Low activity among suppliers of the oil and gas sector has been a drag on overall performance, government says.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   April 21, 2017 at 8:40 AM
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April 21 (UPI) -- Most industrial managers expressed optimism about the pace of the economy, though oil and gas suppliers were less convinced, Norway's government said.

Norway is a leading oil and gas supplier to the European economy, designating nearly all of its offshore production toward exports. Tepid growth in Europe, coupled with lower energy prices by relative standards, could be creating issues on the margins of the Norwegian economy.

Statistics Norway, the country's record-keeping agency, reported that industrial managers were developing a sense of optimism as trends moderate toward recovery.

"The business tendency survey for the first quarter of 2017 shows that the downturn in total production has leveled off compared with the fourth quarter of 2016," it reported. "For manufacturers of capital goods, there was a further decline in production due to the low activity among suppliers to the oil and gas sector."

The agency reported that the marginal downturn was having a particular impact on industries that service the construction of oil platforms. That trend has evolved even as Norwegian energy company Statoil steers offshore contracts to domestic companies.

The company has awarded contracts worth more than $5.7 billion for its giant Johan Sverdrup project in the North Sea so far, with more than 70 percent of them going to Norwegian companies.

For employment, the government said declines were apparent in the capital goods sector, "which are particularly affected by the reduced investment activity in the oil and gas sector."

Overall, the government reported industrial confidence had moved into positive territory for the first time since the third quarter of 2014, but remains below a historical average.

In March, the country's central bank left its key rate unchanged at 0.5 percent. In a statement of justification, the bank said inflation would be lower than it expected, which implies the Norwegian economy is becoming isolated.

Norges Bank found lingering economic strains from energy market factors, though bank Gov. Øystein Olsen said a worst-case scenario never materialized for Norway.

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