The Norwegian economy contracted unexpectedly in the third quarter due to a substantial slowdown in oil and gas extraction.
Gross domestic product slipped 1.6% sequentially in the third quarter, following a 0.2% drop in the prior quarter, Statistics Norway reported Tuesday. Economists were expecting the economy to recover this quarter, by expanding 0.5%.
Planned maintenance on several oil fields reduced oil and gas extraction in the third quarter. Data showed that petroleum activities and ocean transport plunged 10.2%, following a 2.4% drop in the second quarter.
On the other hand, Mainland Norway expanded at a faster pace of 0.9% compared to an increase of 0.5% in the two previous quarters. The growth rate matched economists' expectations. The latest 0.9% expansion was led by increased final consumption expenditure by households and general government as well as increased exports excluding crude oil and natural gas.
On the expenditure side, household spending advanced 1.3% with growth in the consumption of both goods and services. This reversed last quarter's 0.2% fall. At the same time, growth in government spending moderated to 0.7% from 1.3%.
By contrast, gross fixed capital formation fell 7% compared to 7.9% increase in the second quarter. Investment in oil-related activity combined fell by almost 13% in the third quarter. While overall exports dipped 1.3%, imports remained flat.
The International Monetary Fund forecasts Norway's mainland economy to grow around 2.5% to 3% next year following a revival in household demand. The Fund said the economy may expand 1.75% this year.
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