Norway’s Bank: Economists expect solid wage growth and more to spend

Norwegian news in english: Employees will see a 5 percent increase in their paychecks and a solid increase in purchasing power this year if economists’ expectations are met. Economic experts’ expectations for average real wage growth this year are at 0.9 percent, up 0.7 percentage points from the previous quarter, according to the Norwegian Central Bank’s expectations survey released […]

Employees will see a 5 percent increase in their paychecks and a solid increase in purchasing power this year if economists’ expectations are met.

Economic experts’ expectations for average real wage growth this year are at 0.9 percent, up 0.7 percentage points from the previous quarter, according to the Norwegian Central Bank’s expectations survey released Friday morning.

The expectations align well with other figures and forecasts in recent times. The Technical Calculation Committee has estimated price growth at 4.1 percent this year. With an expectation of wage growth at 5 percent, which is also the same as what the Norwegian Central Bank has in its projections for 2024, there will be increased purchasing power – what remains after price growth has taken its toll – at 0.9 percent.

The survey comes just as wage negotiations are getting underway, with the employee side showing expectations for solid wage growth and seemingly inflexible demands for increased purchasing power.

The United Federation of Trade Unions (Fellesforbundet), which will be the first to negotiate with the Confederation of Norwegian Enterprise (Norsk Industri) and set the framework that will be normative for the rest of the organized labor market, will submit its demands on March 18.

Chief Economist Marius Gonsholt Hov at Handelsbanken Capital Markets says to Dagens Næringsliv that the findings are about as expected. He writes to NTB that «immediately this is rate neutral,» but the expectations show that there is a risk of even higher growth this year.

  • The Norwegian Central Bank has a view that it will be a long time before interest rates go down, and this is supported by these figures. We also see that inflation expectations are becoming more entrenched, which may indicate that it will be a while before we have a sustained inflation of two percent. It will take time before rate cuts come, concludes Hov to DN.

So far, the Norwegian Central Bank has been clear that if there are any interest rate cuts before 2025 at all, they will happen well into the second half of this year.

However, Governor Ida Wolden Bache has assured that there are unlikely to be any further interest rate hikes this year if developments go as the Norwegian Central Bank expects.

The parties in the labor market expect an average annual wage growth this year of 5.1 percent and a real wage growth of 0.7 percent. The expectations for wage growth are the same as those reported by the parties in the labor market in the previous survey, while the expectations for real wage growth are 0.1 percentage points higher than last time.

The labor organizations expect an average annual wage growth of 5.4 percent for the current year, up 0.3 percentage points from the previous quarter. The employer organizations, on the other hand, expect 4.7 percent, down 0.5 percentage points.

Business leaders expect an annual wage growth in their own company of 4.7 percent for the current year, up 0.1 percentage point from the previous quarter.

Households expect wage and pension development of 3.3 percent over the next twelve months, up 0.3 percentage points from the previous quarter.