NORWEGIAN COMMERCE TO REBOUND.

 
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Norwegian commerce hit the bottom of its cyclical trough during the second quarter of 2003 and the recovery phase is likely to bring two years of moderate to strong growth in private sector spending.

Overall household expenditure is likely to rise 5 percent during 2004 and 3.4 percent in 2005. The upsurge in household spending is linked to anticipated growth in income. Statistics Norway estimates that real household income will increase by about 5.1 percent in 2004 and 3.3 percent in 2005.

Thanks to Norways low inflation and currency stability, modest wage increases during 2004 will boost real disposable income by a similar amount. Norway is one of the worlds most affluent consumer bases and the margin for discretionary spending is likely to increase over the next two years.

Consumer confidence slipped during 2003 as a result of the Iraq war and concerns over higher-than-normal unemployment. The unemployment rate is likely to peak at about 4.5 percent early in 2004 and drop off slightly after that. Increasing confidence and persistent strength of the national currency (the krone) relative to the US dollar should boost sales of imported durable goods 5 to 10 percent year-on-year by midyear 2004.

Probably the greatest beneficiary of the improving consumption climate next year will be the residential real estate sector. Home sales are likely to rise by more than 5 percent year-on-year as of the first quarter of 2004 and should move up from there as the year progresses.

Demand for new residential units will give a boost to the rather depressed construction sector over the next 12 months. Sales for construction service providers should show gains approaching 10 percent year-on-year by the third quarter of 2004. Sales of building materials and fixtures will rebound next year, but at a slower pace.

Household expenditure on non-durable and semi-durable goods will exhibit anemic gains through most of the first half of 2004. Sustainable growth of 2 to 3 percent year-on-year is likely after midyear.

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