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Norway's Strong Manufacturing Growth Unlikely To Raise Inflation Pressure

The recent strong manufacturing growth in Norway is unlikely to put sustained upward pressure on inflation this year and the Norges Bank will wait until 2019 before raising interest rates, Jack Allen, an economist at Capital Economics, said.

The Purchasing Managers' Index for the manufacturing sector came in at 57.8 in December, which was the highest level since October 2007, survey data showed on January 2.

On past form, it points to an acceleration in annual manufacturing output growth from 1.9 percent in October to over 4 percent, the economist observed.

"This contrasts with the message from surveys of activity in the wider economy, which suggest that annual growth in the mainland economy as a whole has leveled off at around 2 percent."

The price index of the PMI survey also increased. However, Allen said its past association with inflation is weak.

"As exchange rate effects that put downward pressure on inflation last year partially reverse, we think that headline inflation will rise a touch this year," the economist said.

"But there still seems to be enough spare capacity in the economy to keep domestically-generated inflation low."

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