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Norges Bank Executive Board meeting 3 November 2004 1 Norges Bank Economic developments 2 Norges Bank Industrial output in the US, Japan and the euro area Three-month moving average. Seasonally adjusted. Volume 5 5 4 4 3 3 US Euro area 2 2 1 1 0 0 -1 -1 -2 -2 Japan -3 -3 -4 -4 -5 1997 -5 1998 1999 2000 2001 2002 2003 2004 Sources: EcoWin/Federal Reserve Board, Ministry of Economy,Trade and Industry and EUR-OP/EUROSTAT 3 Norges Bank Employment in the US, Japan, Germany, the UK and Sweden. 12-month rise 4 3 4 3 Sweden US 2 2 UK 1 1 Germany 0 0 Japan -1 -1 -2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 -2 Source: EcoWin/National statistics 4 Norges Bank China - GDP So far this year. Percentage change on same month previous year 15 15 12 12 9 9 6 6 3 3 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 0 Source: EcoWin / National Bureau of Statistics China 5 Norges Bank Prices for some important commodities, measured in USD. Index. 2.1.2003 = 100. Daily figures 260 260 Nickel Lead 220 220 Copper 180 180 Aluminium Zinc 140 140 100 The Economist's commodity price index Oil 60 Jan 03 100 60 May 03 Sep 03 Jan 04 May 04 Sep 04 Sources: Norges Bank and Ecowin/ London Metal Exchange, The Economist 6 Norges Bank Interest rate expectations Actual developments and expected key rate1) at 24 June and 28 October 2004. 2 January 2003 – 1 August 2006 6 6 5 5 4 4 UK 3 2 1 0 2003 1) FRA 3 Euro area 2 US 28 October 24 June 1 0 2004 2005 2006 and futures contracts adjusted for the estimated difference between 3-month money market rates and the key rate. Sources: Bloomberg, Reuters and Norges Bank 7 Norges Bank Forward interest rates 29 October 2004. Implied short-term forward rates 6 6 5 5 4 4 3 3 2 2 1 1 Norway 0 2004 Euro area UK US 0 2006 2008 2010 2012 2014 Source: Norges Bank 8 Norges Bank Oil price Brent Blend USD per barrel. Daily figures 60 60 50 28 October 50 40 10 September 40 30 30 Futures prices 24 June (IR 2/04) 20 20 10 10 0 2002 0 2003 2004 2005 2006 2007 Sources: Norges Bank, Telerate and IPE 9 Norges Bank Spread Brent-Dubai and WTI-Brent 14-day moving average. USD per barrel 14 14 12 12 10 Spread Brent and Dubai 10 8 8 6 6 4 Spread WTI and Brent 4 2 2 0 0 -2 2001 -2 2002 2003 2004 Sources: EcoWin AB 10 Norges Bank Oil futures prices USD per barrel light crude. Daily figures 60 60 50 50 40 Delivery in 1 month 30 30 Delivery in 6-7 years 20 10 2001 40 20 10 2002 2003 2004 Sources: Norges Bank and EcoWin/NYMEX 11 Norges Bank OPEC 10 spare capacity Annual figures Million barrels per day 8 8 Monthly figures 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 2000 0 2001 2002 2003 2004 Sources: EIA (annual figures) and IEA (monthly figures) 12 Norges Bank CPI-ATE Total and broken down into imported and domestically produced goods and services1). Historical price inflation and projections IR 2/04 (broken line).12-month rise. Per cent 3 2 1 0 3 2 Goods and services produced in Norway (0.7) 1 CPI-ATE 0 -1 -1 -2 -2 -3 -3 Imported consumer goods (0.3) -4 -4 1) Norges Bank's estimates -5 -5 Jul 03 Oct 03 Jan 04 Apr 04 Jul 04 Oct 04 Sources: Statistics Norway and Norges Bank 13 Norges Bank Developments in the krone exchange rate1) (I-44) Daily figures. 1 January 2002 – 1 November 2004 85 85 90 90 95 95 100 100 1)A 105 Jan 02 rising curve denotes a stronger krone exchange rate Jun 02 Nov 02 Apr 03 Sep 03 Feb 04 105 Jul 04 Source: Norges Bank 14 Norges Bank House prices NEF/ECON (Januar 1998–October 2004) and SN (98 Q1– 04 Q3). Percentage rise on same period previous year 30 30 25 25 20 20 SN 15 15 10 10 NEF 5 5 0 0 -5 1998 -5 1999 2000 2001 2002 2003 2004 Sources: Statistics Norway (SN), Norw. Association of Real Estate Agents (NEF), Association of Real Estate Agency Firms 15 Norges Bank Building starts - dwellings and other buildings 1000 m2 per month. Trend. January 2000 - August 2004 400 400 350 350 300 250 300 Other building starts 250 Housing starts 200 200 150 150 100 2000 100 2001 2002 2003 2004 Source: Statistics Norway 16 Norges Bank Price index for office and commercial property Index 2000 = 100. 1st half of 1996 – 1st half of 2004 130 130 120 120 110 110 100 100 90 90 80 80 70 70 60 60 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Statistics Norway 17 Norges Bank Credit from domestic sources to households and nonfinancial enterprises (C2). Percentage growth on same month previous year. August 2001 – September 2004 15 15 C2 households 12 12 C2 total 9 9 6 6 C2 non-financial enterprises 3 3 0 -3 Aug 01 Jan 02 0 -3 Jun 02 Nov 02 Apr 03 Sep 03 Feb 04 Jul 04 Source: Norges Bank 18 Norges Bank Local government revenues, underlying spending growth over the central government budget and mainland GDP Percentage change in value from 2003 to 2005 15 15 12 12 9 9 6 6 3 3 0 Revenues Local government Spending Central government GDP Mainland Norway Source: National Budget 2005 0 19 Norges Bank Developments in employment and output four quarters after the start of a cyclical upturn1). Mainland Norway. Per cent 4 3 4 Now 3 Previous 2 2 1 1 Previous Now 0 0 Mainland GDP Number employed 1) We have assumed that the previous cyclical upturns began in 1982 Q4 and 1991 Q4. The current cyclical upturn started in 2003 Q2. Sources: Statistics Norway and Norges Bank 20 Norges Bank Assumptions for money market rates and the krone exchange rate I-441) (forward interest rate and forward exchange rate) 8 110 3-month money market rate 7 6 105 Forward interest rate 24 June (IR 2/04) 5 4 Import-weighted exchange rate, I-44 Forward exchange rate 24 June (IR 2/04) 100 95 3 90 Forward exchange rate 28 Oct (IR 3/04) 2 1 Forward interest rate 28 Oct (IR 3/04) 1) A rising curve denotes a weaker krone exchange rate 0 2001 85 2003 2005 2007 80 2001 2003 2005 2007 Source: Norges Bank 21 Norges Bank Projections and uncertainty for CPI-ATE1) 12-month rise. Per cent. January 2001– December 2007 5 5 30% 1) 50% 70% 90% 4 4 3 3 2 2 1 1 0 2001 0 2002 2003 2004 2005 2006 2007 The bands in the fan indicate different probabilities for developments in the CPI-ATE. Sources: Statistics Norway and Norges Bank 22 Norges Bank Projections for the CPI-ATE1) and the output gap2) Inflation Report 2/04 (blue) and 3/04 (red). Per cent 3 3 2 CPI-ATE IR 2/04 IR 3/04 2 1 1 0 0 Output gap -1 -1 1) CPI-ATE: 2) The CPI adjusted for tax changes and excluding energy products output gap measures the difference between actual and trend mainland GDP -2 -2 2002 2003 2004 2005 2006 2007 Sources: Statistics Norway and Norges Bank 23 Norges Bank Projections for main macroeconomic aggregates IR 3/04 2004 2005 2006 2007 4¼ 4 3½ 2¼ Private consumption 5 4½ 3¾ 2½ Public consumption 2 1¾ 1½ 1½ 5¾ 5 5 2¾ 12½ 15 5 -7½ 4 4½ 3 3 Imports 8½ 6 4 1¾ Mainland GDP 3¾ 3½ 2¾ 2 ¼ 1¼ 1¼ ½ 4½ 4 3¾ 3¾ ¼ 1½ 1¾ 2¼ Annual wage growth 3¾ 4½ 4¾ 4¾ Output gap mainland Norway -¼ ¾ 1 ½ Mainland demand Gross investment Petroleum investment Traditional exports Employment LFS unemployment (rate) CPI-ATE Source: Norges Bank 24