Norway's economy facing petroleum-related headwinds

Country's central bank recently kept it's lending rate static after stating that petroleum investments may have bottomed this year.
By Daniel J. Graeber  |  Nov. 7, 2017 at 7:54 AM
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Nov. 7 (UPI) -- Norway, one of the largest oil and gas producers in the world, said the output from petroleum-related manufacturing turned lower in the third quarter.

"Norwegian manufacturing output went down 0.7 per cent from the second quarter to the third quarter of 2017, according to seasonally-adjusted figures," the government's statistics office reported Tuesday. "Petroleum-related manufacturing contributed most to pull down the overall activity level, while food products contributed to dampen the decline."

For the year ending in August, the government said total manufacturing output grew 0.2 percent, compared with a 4.4 percent gain over the same period in the European Union.

Norge Bank, the nation's central bank, said earlier this year that oil and gas production for Norway peaked more than a decade ago, though the sector as a whole may have been underestimated.

The bank in October said the Norwegian economy was struggling to pick up the pace, with inflation expected to stay below 2.5 percent over the next few years. Though the labor market is gaining strength, the value of the currency, the krone, is weaker than expected and the bank kept its key policy rate at 0.5 percent.

The Norwegian Petroleum Directorate, the nation's energy regulator, reported lower sales and lower production, based on preliminary data for September. Preliminary data show oil production was 1.44 million barrels of oil per day, which was about 11 percent lower than expected.

Statistics Norway said Tuesday that a production index covering extraction, mining, manufacturing and electricity supply posted a small gain of 0.8 percent in the third quarter.

"The growth is particularly due to a strong increase of 10.4 per cent within extraction of natural gas," the report read. "Extraction of crude petroleum, on the other hand, fell by 5.6 percent."

In its report from September, the central bank said growth in gross domestic product for the first half of the year was around 0.7 percent, but a slowdown was expected in the second half. Investments in petroleum, meanwhile, may bottom out this year.

Norway is important to the European economy as an exporting nation. Nearly all of the oil and gas produced from Norwegian waters heads to the EU.

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