The case is continuously updated.
Norges Bank issues an expectations survey to companies four times a year, the previous one came in November. Emphasis is placed on these surveys when the central bank assesses future interest rates. Central themes in these surveys are salary and price expectations from various environments
The parties in working life expect annual wage growth of 4.8 per cent, an increase of 0.4 percentage points from the previous quarter. It is far above what Norges Bank has envisioned, something we will return to.
Business leaders expect annual wage growth in their own company of 4.4 per cent for the current year, and that is up 0.2 percentage points from the previous quarter.
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It is going better than expected
Handelsbanken believes that today’s survey can confirm that future growth will be better than what the contact companies assumed last autumn. The companies then signaled a marked drop in expected profitability over the next twelve months. Plans for net growth in employment were also scaled back further.
And the big bank’s experts are right. 22.8 per cent of business leaders now believe in improved profitability in their own company in the next 12 months, up 6.7 percentage points from the previous quarter.
Things are going better in the Norwegian economy than expected. The development among our most important trading partners has also been strong. Therefore, Handelsbanken’s experts predicted a somewhat upward adjustment of expectations this time, which is of course positive.
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Important signals
However, the survey also provides important indications for wage growth going forward. The figures from Statistics Norway so far indicate that wage growth last year was stronger than Norges Bank has envisaged. The relevant figure here is “accrued annual salary”, which last year showed an increase of 4.4 per cent, according to Statistics Norway.
In that case, it is above Norges Bank’s forecast for this year of 3.9 per cent. Handelsbanken wrote in the morning that if the wage estimate for the parties in working life rises above Norges Bank’s forecast, it will lead to even higher interest rates in the future.
A wage forecast of 4.8 per cent is therefore far above what Norges Bank has envisioned. The interest rate market does not rule out that the key interest rate could be raised to 3.50 per cent during 2023, in which case up 0.75 percentage points from current levels.
The economic experts also believe that the average annual wage growth this year will be 4.5 per cent. This is up 0.4 percentage points from the previous quarter and emphasizes that there are now massive expectations for higher wage growth than previously thought.
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Not much to cheer about
The same experts believe that prices will rise by 4.3 per cent this year. There may therefore be a slight improvement in households’ purchasing power after the blow they received last year.
But the parties in working life believe in an average price increase this year of 4.8 per cent, so there may be zero real wage growth. On average, the forecast is an improvement of 0.3 percent.
Nine out of ten Norwegian consumers expect higher prices in a year’s time than today, compared to eight out of ten in November last year. Just over seven out of ten predict higher interest rates in one year’s time, and this is actually a decrease from the previous survey.
The most recent survey was also carried out in the period 16 January to 6 February 2023.
The background for the survey is that Norges Bank, with its monetary policy (read: interest rates), wants low and stable inflation. Expectations of the future price development can in themselves play a role in the actual price development
