Summary

The output gap quantifies aggregate capacity utilisation in the economy. Norges Bank’s output gap assessment starts with a trend calculation (HP filter) of mainland GDP. Such trend estimates are inherently subject to uncertainty, particularly towards the end of the sample period. Thus, the estimated trend is adjusted based on other key information about capacity utilisation in the economy. In our assessments, particular emphasis is given to developments in the labour market. The labour market provides a good gauge of the level of economic activity. As labour market figures are published regularly and seldom revised, they are very useful in real-time assessment of capacity utilisation in the economy. In our assessment of capacity utilisation in enterprises, particular emphasis is given to the reports from Norges Bank’s regional network.