– Looking for any signs that interest rates are biting – E24

– This week there is an awful lot coming at the same time. We are looking for all signs that interest rate increases have begun to bite, says chief economist Harald Magnus Andreassen in Sparebank 1 Markets.

Very first out is Statistics from Statistics Norway on how many goods were bought and sold in April.

– The spectacular thing now is that households have completely lost heart. People have not looked so gloomily at their own finances since the banking crisis 30 years ago, at the same time as unemployment is the lowest in ten years and disposable income has grown steadily in the last couple of years. It is not easy to see in the data why people should be so worried, says Andreassen.

Both Opinion’s consumer survey and Finans Norge’s consumer survey have already reported on people’s concerns about the future.

– Now we get a little check on whether this translates into behavior, Andreassen says.

Statistics Norway’s commodity trade index has already fallen somewhat from the top during the corona shutdown.

– It was extremely high, and the trend is down.

Housing price figures can show the effect of an interest rate increase

The day after the retail trade figures come Statistics Norway with a so-called credit indicator. It shows how much debt people have.

– There have been no signs that low interest rates in the last two years have led to households being fired. Now the interest rate is rising, and you can then see the effect of that in the loan figures, asks the chief economist at Sparebank 1 Markets.

At the end of the week it comes too figures on house prices in Norway from Eiendom Norge.

–

– They flattened out in April, and now in May interest rates are slowly but surely starting to gnaw. It would still not be a problem that house prices eventually fall a few percent, it can be very healthy.

– We have seen, with Stavanger as an example, that housing prices can fall a lot, while it is still profitable to build housing, says Andreassen.

The labor market may fall

Perhaps the most important figure for measuring the temperature in the Norwegian economy at the moment is coming to an end, Friday morning.

– Nav vacancy has shown that unemployment has fallen terribly fast. Now we get figures from May, and they will probably show a further decline in unemployment, says Andreassen.

The level today is already at what Norges Bank thought would be the bottom, according to him.

– We will probably slip under it as well. If not now then in the next few months. The companies have great ambitions to staff companies and labor immigration is not as high, since there is a record shortage of labor throughout Europe, the Sparebank 1 Markets economist explains.

On Wednesday, figures from the Purchasing Managers’ Index (PMI) in Norway. It is expected to confirm what the labor market figures say about continued high temperatures in the Norwegian economy.

The economy’s most important single barometer

Abroad, the purchasing managers’ indices may dominate the news picture.

First out is ISM Index of Industry in the United States on Wednesday.

– It is the most important single barometer we have. It is a very good summary of the stoda and you can plot it against almost anything else and see a connection, says Andreassen.

Rashes here may therefore point to bigger things in store elsewhere in the economy.

– We see that the main direction is downwards, in addition to the fact that the shutdowns in China have had some shock effects. From before, the barometer has fallen from the 60s to the 55s. Now it is expected just below there.

The number on the ISM index indicates how many purchasing managers report increased activity in their companies, compared with how many report reduced activity. If the number is 50, there were the same number of each variety, while a number over 50 indicates that there are more who report increased activity than reduced activity.

–

– The risk here is that the index may surprise on the downside. If it breaks down two to three percentage points, then the distance to recession has become significantly smaller, then you see the brake tracks in the economy.

– Several regional measurements that I have looked at, five out of seven, indicate that the fall may be much larger than expected.

Unemployment figures

– The next thing on the list is “make it or break it”. We get three important figures for the labor market in the USA, Andreassen says.

The inflation that central banks around the world are now trying to stagnate is often decided in the labor market. If wages rise, it will spread to all other prices in the economy and one could end up in a «wage-price spiral».

– The vacancy report, JOLT, has been miles above what we’ve ever seen before in history. In March, 7.1 per cent of all positions were vacant. Normals are less than half of that, and wage growth is extremely closely correlated with the number of vacancies, says the chief economist.

The Governor of the United States has now envisioned that he will reduce the number of vacancies, without unemployment rising. Andreassen thinks it will be difficult.

– Traditionally, it has been that if you are to reduce the number of vacancies by one percent, then unemployment must increase by two. Now it is going down from 7.1 percent to 4.0 percent? This means an unemployment rate that goes from 3.5 to 9.5 percent.

–

– It probably does not happen, but as long as you go from 3.5 to 4.0 percent unemployment, then there is a recession. You have extremely little to go on, says Andreassen.

He points out that an increase in unemployment of half a percentage point is often referred to as a recession. That equates to about 800,000 more unemployed Americans, compared to today.

– The Oslo Stock Exchange has always fallen 40-50-60 percent. It can happen this time too, if it has always happened before.

On Friday, there will also be headlines during the entire pandemic: “Non-farm payrolls”, ie the number of jobs created in the US outside of seasonally sensitive agriculture.

– Growth in employment is not important now. Unemployment and wage growth are now the most important. There may be signs of subdued wage growth, it would have been very welcome, but it must go down so much that it is not obvious that wage pressure will give in time to bring inflation down, says Andreassen.

–