Despite the fact that interest rate cuts in Norway are unlikely to take place until next year, it still appears that the Norwegian economy is on the way to an upswing, Erik Solum writes in this post.
Several positive factors, such as lower price growth, a good wage settlement and improved purchasing power, are helping to create an optimistic future. The economists now estimate that there will be more interest rate cuts in 2025, which could contribute to further growth and consumption – a positive signal for the entire car market and other industries.
Increased purchasing power including lower price growth
After several years of high price growth, which has helped reduce the purchasing power of Norwegian households, the trend has now reversed. Consumer price inflation has fallen significantly and is now around 2.6 per cent. Combined with a favorable wage settlement, this means that Norwegian households can expect real wage growth of around two percent in 2024.
Norges Bank also estimates that this positive development will continue in the future. This can mean increased demand for both goods and services, and for the car market it can mean more purchases, as well as greater demand for newer and more environmentally friendly car models.
Stable labor market conditions and increased employment
The labor market is also relatively stable. The demand for labor is still high and there are many vacancies in the market, which gives an important boost to the Norwegian economy. Although a slight increase in unemployment is expected, it will probably stabilize at relatively low levels compared to previous years. Increased employment strengthens household incomes, and thus also overall demand in the economy.
Interest rate cuts and low interest rates as a growth driver
Internationally, several central banks have already started to lower interest rates – something that may eventually spill over to Norway as well. Both in the USA, Sweden and the EU, the interest rate cuts have come as a reaction to lower inflation, and these measures mean that consumption growth has picked up in these economies.
However, Norges Bank is dependent on developments among trading partners, and several interest rate cuts from Norway’s side may be expected during 2025. Lower interest rates will give Norwegian households better liquidity and lower borrowing costs, which can further strengthen consumption.
Positive outlook for 2025
All in all, the forecasts show that the Norwegian economy is facing brighter times. For businesses and consumers, this could be a long-awaited break from the pressure of high price growth and high interest rates. For the car market, this means opportunities to reach more customers with increased purchasing power and lower financing costs, as well as increased interest in investments in both new and used cars.
By following the positive development in purchasing power, employment and interest rate prospects, the car industry can look forward to potentially increased sales in 2025.
For car importers, this means opportunities to cater to a market that is ready for growth, and to contribute to a sustainable recovery in the Norwegian economy. Early in January 2025, together with the Road Traffic Information Council (OFV), we will present our forecast for 2025.
Don’t be surprised if we estimate sales of close to 140,000 new cars for 2025.
Erik Solum shares thoughts and trends in “Market insight”. He is head of insight, analysis and sustainability at the National Association of Car Transporters (BIL). Photo: BIL