Global growth has firmed markedly this year, lifted by strong optimism and highly supportive financial conditions. DNB Markets expect 2018 to be another good year for the world economy. Wage and inflation pressure looks set to remain muted despite continued labour market improvements in major advanced economies. This will limit the pace of Fed hikes, and delay the first steps toward policy normalisation in the euro zone, Japan and Sweden. Main (known) risks are an abrupt repricing in the financial markets as the age of extraordinary measures is coming to an end, a “hard landing” in China, a US recession and an escalation of geopolitical tensions.
Norway 2017 has been a year marked by a smaller negative drag from oil investments, higher private consumption and a marked rise in housing investments. In 2018, growth may firm slightly further. Private consumption will be supported by higher income growth. Business investments and exports will continue to rebound, after several weak years, while housing investments will fall. Unemployment will edge down, but inflation will stay low due to continued moderate wage growth and a weak contribution from imported price growth. DNB Markets expect Norges Bank to hike rates in September 2019, a little later than in Sweden and the euro zone.