Wage growth revised up as recruitment difficulties ease
Norges Bank's Regional Network contacts report easing recruitment difficulties and revised up wage growth estimates to 4.5 percent for 2026 and 4.1 percent for 2027. They expect economic growth to pick up in Q3 after a Q2 slowdown.
Wage growth outlook shifts
Norges Bank's Regional Network contacts report a notable easing in recruitment difficulties and a slight reduction in capacity constraints since the previous survey.
This indicates a moderation in labor market tightness across various sectors.
Despite this, annual wage growth estimates have been revised upwards, now projected at 4.5 percent for 2026 and 4.1 percent for 2027.
This upward adjustment suggests persistent underlying cost pressures, which could influence future inflation trends.
While growth expectations for 2026 Q2 have been revised down, contacts anticipate a rebound in activity during Q3. This mixed outlook reflects cautious business sentiment, balancing immediate slowdowns with future recovery prospects.
Overall profitability among contacts remains largely unchanged compared to the second quarter of 2025, indicating a stable, yet not rapidly improving, business environment.
The survey offers key insights into the real economy's current state and short-term trajectory, informing Norges Bank's ongoing assessment of economic conditions.
Hesitant customers, new investments
Most sectors, with the exception of oil services, anticipate higher activity ahead, yet many contacts report increased customer hesitancy.
This caution is primarily attributed to the prospects of higher interest rates and stronger cost growth on the horizon, impacting consumer and business spending decisions.
Conversely, several significant investment projects are providing a counterbalance to this cautious sentiment.
The ongoing buildout of data centers, advancements in energy supply development, and increased defence investments are collectively improving the outlook for a segment of the Regional Network contacts.
These strategic investments are expected to drive activity in specific areas, mitigating some of the broader economic headwinds.
Contacts are planning to increase employment slightly in both 2025 Q2 and Q3, indicating a measured optimism despite the prevailing uncertainties.
Cautious optimism, persistent pressures
This survey paints a picture of a Norwegian economy navigating conflicting forces, with easing labor market pressures offset by persistent wage growth and customer caution.
While strategic investments offer localized boosts, the broader outlook remains tethered to interest rate developments and cost inflation.
For Norges Bank, these findings underscore the delicate balance required in monetary policy, suggesting that inflationary pressures, particularly from wages, may prove more stubborn than initially hoped.