Norges Bank

Press release

New information since the June Monetary Policy Report (2/11)

International economy

  • Growth in the global economy has been weaker than projected in the June 2011 Monetary Policy Report. Seasonally adjusted GDP growth in the UK was 0.2 per cent between the first and second quarter of 2011. In the US, GDP growth was a seasonally adjusted 0.3 per cent in the same period, and growth has been revised down from 0.5 to 0.1 per cent between the fourth quarter of 2010 and the first quarter of 2011. Growth in the Swedish economy was 1.0 per cent between the first and second quarter of 2011. In emerging market economies, the pace of growth has slowed somewhat, but remains at high levels.
  • Growth in manufacturing output among Norway's main trading partners has lost momentum in recent months. Different expectations indicators may point to somewhat slower growth ahead.
  • The twelve-month rise in consumer prices has flattened out in the US and edged down in Europe.
  • Among most of Norway's trading partners, short-term inflation expectations have diminished somewhat since the June Report. Long-term inflation expectations are approximately unchanged.

Financial markets [1]

  • Financial markets have been marked by growing turbulence lately, despite a series of measures implemented in the course of summer.
  • The euro area has presented a new debt financing package for Greece, with longer maturities and lower interest rates. Portugal and Ireland will be given similar terms. In August, the ECB resumed purchases of euro area government bonds. At the same time, loans with a maturity of six months were reintroduced and the period extended for the extraordinary liquidity measures.
  • In the US, Congress agreed to raise the federal debt ceiling. At the same time, substantial spending reductions over a ten-year period were approved.

Equities and commodities

  • Oil prices are somewhat lower than around the June Report.
  • The Economist weekly commodity-price index measured in XDR [2] has remained broadly unchanged since the June Report. Other commodity indices have fallen markedly in recent days.
  • Gold prices have risen by 10 per cent since the June Report.
  • International stock indices have dropped sharply.

Interest rates

  • Standard & Poor's has downgraded the credit rating on US long-term sovereign debt.
  • The ECB raised its key rate to 1.5 per cent in July. The Federal Reserve has announced that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. Market expectations concerning key rates among our trading partners have decreased compared with the June Report. The key policy rate for the euro area is expected to remain unchanged over the next twelve months. In the US and the UK, an interest rate hike is not expected before 2013.
  • The interest rate differential between Norway and trading partners is now 1.7 percentage points, as measured by the three-month money market rate.
  • In Norway, the spread between three-month money market rates and the expected key policy rate (the premium) is approximately 0.7 percentage point. So far in the third quarter of 2011, the premium has been somewhat higher than assumed in the June Report.
  • According to figures from Norsk familieøkonomi, the weighted average interest rate on new residential mortgages is 3.77 per cent, approximately unchanged since the June Report [3].
  • Since the June Report, the spread against German ten-year government bond yields has widened for Italy and Spain and is now slightly below 3 percentage points. The spread increased markedly through summer, but has narrowed in recent days after the ECB resumed bond purchases. The spread against German ten-year government bond yields has narrowed for Greece, Portugal and Ireland.
  • Long-term US and German government bond yields have fallen since the June Report. Ten-year government bond yields in the US and Germany are now about 2.3 per cent. Norwegian long-term government bond yields have fallen sharply.
  • Risk premiums on Portuguese, Irish, Spanish and Italian covered bonds have risen since the June Report and now stand at 7.2, 4.2, 2.8 and 2.2 percentage points, respectively. Risk premiums on Portuguese and Italian covered bonds have shown the largest change, increasing by 1.9 and 0.9 percentage points, respectively.
  • The price of funding for European financial institutions has increased somewhat. CDS prices for European financial institutions, as measured by the iTraxx [4]index have risen by 54 basis points since the June Report.

Exchange rates

  • Since the June Report, the effective exchange rate of the euro (EUR) has depreciated by 3.3 per cent, while the US dollar (USD) has remained approximately unchanged. The Swiss franc (CHF) and Japanese yen (JPY) have appreciated by 14 and 3.9 per cent, respectively, since the June Report. Commodity currencies, such as the Canadian (CAD) and Australian dollar (AUD), have depreciated.
  • The import-weighted krone exchange rate (I-44) is approximately unchanged since the June Report. So far in the third quarter, the krone has moved broadly in line with that projected in the June Report.

Norwegian economy


  • In the year to July 2011, the consumer price index (CPI) rose by 1.6 per cent. Adjusted for tax changes and excluding temporary changes in energy prices (CPIXE), consumer prices rose by 1.3 per cent. The 12-month rise in the CPI and CPIXE was respectively 0.3 and 0.2 percentage point lower than projected in the June Monetary Policy Report. In particular, the rise in electricity prices was lower than expected. Various indicators of underlying inflation ranged between 1.2 and 1.9 per cent.

Output and demand

  • Seasonally adjusted household spending on goods rose by 1.1 per cent from April to May 2011, following a 0.5 per cent rise the previous month. Opinions ForbrukerMeter's confidence indicator, which measures consumers' view of their own financial situation and the Norway’s economy, rose between May and June 2011.
  • According to building statistics, the seasonally adjusted number of housing starts in the period between April and June was unchanged from the previous three-month period. Housing starts increased by 31 per cent on the same period last year. Other building starts, measured in square meters, were 9 per cent lower in the period between April and June than in the previous three-month period, adjusted for seasonal variations. Other buildings starts were lower in the period between April and June than in the same period one year earlier.
  • Output was 0.4 per cent lower in the second quarter than in the first quarter. Working day adjusted, manufacturing output increased by 0.9 per cent in the period between the second quarter of 2010 and the second quarter of 2011.
  • The indices in the Norwegian PMI (Purchasing Managers' Index) for production, orders and employment in manufacturing were well above 50 in July, indicating increased activity.
  • The volume of traditional merchandise exports rose by a seasonally adjusted 7.4 per cent between the first and second quarter of 2011. Traditional merchandise imports fell by 3.7 per cent in the same period.
  • Enterprises in manufacturing and mining reported higher employment and output in the second quarter. New domestic orders rose, while new export orders declined. The composite economic indicator for manufacturing remained unchanged between the first and second quarter.

Labour market and wages

  • Registered unemployment was a seasonally adjusted 2.6 per cent of the labour force in July, unchanged on June. Registered unemployment was somewhat higher than projected in the June Report.
  • According to Statistics Norway’s labour force survey (LFS), seasonally adjusted unemployment was 3.3 per cent of the labour force in the period between April and June, up from 3.2 per cent in the previous three-month period. Employment and the labour force increased in the same period by 4 000 and 7 000, respectively.

Domestic credit and house prices

  • Gross domestic debt in the private and municipal sector (C2) rose by 6.0 per cent in the year to June 2011, down from 6.5 per cent in April. Household debt increased by 7.1 per cent. Debt growth for non-financial corporations was 2.9 per cent.
  • According to house price statistics from the real estate industry, house prices rose by 9.6 per cent in the year to July 2011, up from 8.9 per cent in June. In real terms, seasonally adjusted house prices, deflated by the CPI, were 3.5 per cent higher in June this year than the previous peak in June 2007.



  1. All figures are changes since 22 June 2011 unless otherwise specified. All market data are as at 9 August 2011
  2. Special drawing rights, IMF. As at 9 August, XDR 1 = NOK 8.79
  3. New variable-rate residential mortgages of NOK 1 million, within 60 per cent of the purchase price
  4. The iTraxx financial index contains the CDS spreads of 25 major European financial institutions


Press telephone: +47 21 49 09 30

Published 10 August 2011 14:00