OSLO: Norwegian unemployment surged and consumption fell in September, putting pressure on the central bank to loosen policy as the economy falls victim to plunging oil prices and Europe's tepid growth.
The jobless rate jumped to 3.7 percent, defying expectations for an unchanged 3.4 percent rate. Retail sales eased 0.1 percent on the month, against expectations for a 0.8 percent increase.
"We are adjusting our interest rate forecast today and now see a rate cut in the summer of 2015," DNB economist Kyrre Aamdal said. "The numbers are clearly weaker both for retail and unemployment. Today's economic data increase the chance that this cut will come earlier."
DNB earlier on Wednesday cut its forecasts for Brent crude by $20 per barrel to $80 and sees the 2016 price at $85, indicating an extended drag on the Norwegian economy. Brent traded around $115 per barrel in June, falling to around $85 this month.
The crown fell more than half a percent against the euro on expectations the central bank could further delay its planned rate hike and may float the prospect of a rate cut to aid the economy.
Expectations for lower rates gained strength on Tuesday when neighbouring Sweden slashed its rates to zero, opening a big rate differential with Norway, which had planned to keep its key rate at 1.5 percent until 2016.
Although Norway's economy has consistently outperformed the euro zone's, its prospects are dimming. Oil prices have fallen by a quarter since June and energy investments may fall as much as a 15 percent next year, weighing on the oil sector, which accounts for a fifth of GDP.
The central bank has predicted steady rates throughout 2015 before one hike in 2016 and one in 2017. It will release new forecasts on December 11.
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