Oslo Housing & Trade Balance Say: Tipping Point in Norway

Time to Short the Norwegian Krone?

By Nick Kamran at LettersfromNorway.com:

Traditionally, July is a slow month in Norway. Receiving sizable vacation pay in June, most Norwegian take three to four weeks off in July, enjoying most of their five-week annual vacation. If you worked overtime, you could add a few extra weeks, taking back those extra hours worked, turning that holiday into a sabbatical. However, while Norwegians live it up in Spain, Thailand, Croatia, and even America, trouble awaits them when they return home this fall.

While housing prices may have finally reached the long-anticipated tipping point and the monthly trade balance posted a deficit for the first time since December 1998, the Norwegian Krone gained substantial strength, closing at 8.07 against the US Dollar. Going against the wishes and needs of exporters, that is well below the USDNOK=8.45 YTD average (July 23, 2017).

However, Norges Bank indicated that rate cuts are over, following the ECB’s and US Federal Reserve Bank’s lead. Considering the importance of housing in the Norwegian economy and the need to boost exports, compensating for a fading oil sector, we can expect new and more exotic policies to push the NOK back down are already on the way.

Building the Case against the NOK

Housing and Trade, which benefit from low-interest rates fueling leverage while driving down the NOK are showing fatigue despite favors from the Central Bank:


Even with historically low-key rates (.5% since early 2016) and a surge in money supply back in early 2015, housing is starting to peak. That is not only a result of Norges Bank’s change in bias but also many Norwegian banks started to increase lending requirements for investment property.

Interest Rates vs. Oslo Housing – The housing party in Oslo was clearly fueled by excessively low-interest rates that are well below the rate of inflation (click to enlarge):

Unbeknownst to most Norwegians, Norges Bank boosted money supply by 83% in April 2015 to buy the Kroner needed to fund government expenditures from the sale of NBIM’s assets that are denominated in foreign currency. The public spending resulting from the boost in money supply, buying apartments for refugee housing, further inflated the Oslo housing bubble.

Even the Norwegian mainstream media is starting to acknowledge that the party is coming to and. The always-up Oslo housing is running out of cocaine. Not only are viewings down, but real estate agents are advising clients to cut prices and lower their expectations. The first reports of homes in Oslo selling below asking price are coming out as well. That is a huge departure from just last year where the attitude towards housing was optimistic despite the warnings about being overleveraged.


Norway’s trade surplus, mostly depending on oil, has taken a hit despite all the measures to boost exports. Norway posted its’ first monthly trade deficit (-756 M NOK or $90 million) since December 1998. Although Norway compromised philosophical values and its IT sector, hoping to boost fish sales, the trend line has been defined. Moreover, fish prices appear to have peaked as more entrants are getting into the game, namely Chile.

The Norwegians need to think beyond a natural resource economy, finding a way to bring back shipbuilding and steel.

With rate cuts off the table and now too obvious. It appears we can expect a somewhat expected surprise next month when the money supply is updated. The chart below illustrates the losing battle between money supply and exchange rates; the Central Bank always yielding by adding money supply to appease those who want a weak Krone. As of the latest report, Money supply is up 7.2% year over year.

The next money supply report comes out on August 8, 2017

As of 8:00 AM today (July 24), the NOK is on the stronger side of the trend, ready to take a hit, shoring up trade and housing. Although Norges Bank will like to sit still, there is an election coming this fall and they will have to either change direction on rate policy or further boost money supply to keep the status-quo. By Nick Kamran, Letters from Norway.

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  28 comments for “Oslo Housing & Trade Balance Say: Tipping Point in Norway

  1. Stevedcfc72 says:

    Hi Nick,

    Really interesting article on Norway.

    You mentioned ship building and steel, steel especially is being produced by China in huge amounts and I presume shipbuilding is done a lot cheaper elsewhere compared to Norway, they just can’t compete.

    As you say oil is going out of fashion whether OPEC like it or not.

    What else does that leave for Norway to take on?

    • nick kelly says:

      ‘The Norwegians need to think beyond a natural resource economy, finding a way to bring back shipbuilding and steel.’

      The info on kroner, rates and housing makes sense but it’s hard to know which of the two recommendations above is more strange.

      Steel stands out. Along with the US, Japan, Russia, Germany, and the 900 pound gorilla, China, that makes HALF the world’s steel there are some- not- so familiar suspects big in steel, like South Korea, Belgium, France, India and Canada.
      They all have one thing in common: like autos and airlines they are seen as symbols of national virility. (‘Stalin’ was not the dictator’s real name, he adopted the Russian word for steel.)
      This means they are subsidized and tolerated beyond normal.

      The Chinese will run a steel mill for the fun of it.

      Oh God! Here I am a dual Can/ Brit and I’d forgotten the poor old
      UK! Yes, yes, old Blighty is still being blighted by the smoke stacks of steel works.
      The problem is thinking of countries NOT in steel.
      Under these circumstances the stuff is not highly profitable and is almost certain to soon have US tariffs placed on imports.

      High skill economies like Norway should just import it and add value to it by manufacturing. Given the environmental costs in a crowded place like the UK, it probably loses money on every ton. If a customer orders leather seats in a Range Rover, that alone may be more profitable than the savings from domestic steel, if there were any to begin with.

      So on to ship building. The world is so flooded with ships right now that ships in not such bad shape are being scrapped rather than pay moorage, maintenance and skeleton crew fees.
      Since WWII, basic hull construction has been bounced down the ladder: from Europe to Japan then to South Korea. But with the collapse of the S Korean Hanjin line, they will think twice before building more.

      Norway can build ships, and could consider some specialized ones: oil platform support ships, small ice breakers and ferries. Fishing vessels.
      Perhaps luxury cruise liners but these are not ordered by the dozen, the way container ships once were. There is never an assembly line.

      Sign of the times: British Columbia built its first fleet of fast ferries in 60’s etc.
      Our last ferry was built in Poland, to the usual howls of ‘do it here’.

      At the moment, non-specialized, non-military ship building does not look promising.

      • Stevedcfc72 says:

        Hi Nick,

        Unfortunately the Steel Industry in good old Blighty is tiny now, not helped either by the cheap Chinese imports.

    • milking institute says:

      No need to worry about Norway,with a population about one third the size of metro LA and rich resources (oil,timber,fish) nobody is likely to go hungry there anytime soon. do check out Nick’s blog though,especially his personal intro and how he came to live in Norway as a American and the strange culture he learned to deal with. fascinating stuff,very different life in a tiny country (where everybody knows everything about you) compared to what we are used to.

      • milking institute says:

        Just to stay on point,does Norway have a housing bubble? but of course,all of Scandinavia has one as do: everybody else! lol so who gets popped first,the Aussies,Canada,China or England? tough choice,can’t really pick a favorite although Canada and Australia seem like the most severely infested Boils out there?

    • Stavros H says:

      In matter of fact, oil usage continues to surge worldwide. Don’t be fooled by the current, absurdly low price. It won’t last.

  2. Petunia says:

    I’m watching a lot of foreign tv on Netflix, including productions out of Norway. Fascinating to watch on many levels for the average American.
    Is a Norwood industry in the cards?

  3. Maximus Minimus says:

    Once you to mention fish as the base of the economy, you are really getting desperate. Make no mistake, fish is a great staple food and a major asset, and one hundred years ago, could have been a great economic base. Back to the present, and life’s basics have been inflated to such heights that you need to be a mega producer of a commodity to make it in the first world.
    It is not my idea to strip the earth bare just to provide for normal, basic necessities, but there you have it.
    In case of Norway, I would look at cheap electricity, and what can be made with that asset.

    • Maximus Minimus says:

      I should also add, do not multiply your population. Small, homogeneous population on a large land is a major asset. If some others like it crowded, let them be.

    • Wolf Richter says:

      Salmon farming is a HUGE business. The fjords are full of salmon farms.

      • Martha says:

        Salmon farming is ecologically & economically inefficient. Salmon farming creates a uniform product at a uniform time for retailers of flash frozen or so-called “fresh” salmon in offseason. Most farmed salmon flesh would be pale or gray without adding krill pellets before harvest. It is estimated that 40-45% of krill is lost or wasted during fishing/harvesting. Amongst the krill in the net is bycatch, a fancy name for the fish that end up in a fisherman’s catch that is not the official fish target of the fisherman. Modern fishery management is a joke: you only get to keep the species you are hunting for on a seasonal allocation. Catch something not on your season list, you have to throw it away. Imagine telling a gold miner that she only gets to keep 5 pounds of gold & must throw 70 pounds silver away.

    • nick kelly says:

      Re: cheap electricity.
      Just don’t think about aluminum.
      That’s another one where the Chinese have really blown their brains out.
      Two trillion US$ equivalent invested.
      According to China expert Ann Stevenson-Yang, when a plant tried to close, the state- owned bank wouldn’t let it cuz bank would have to declare a bad loan.
      Not sure but I think Alcoa had to restructure or something cuz of low AL price.

      One hope for Al. if auto’s went for it in a big way like new F 150.
      With most low hanging fruit gone in fuel efficient mods, this might be the the last way to lower weight.

  4. Kim McD. says:

    You know I was wondering why Norway was in SE Syria training moderates with the CIA and also why Norway was holding such massive NATO drills in prep for a “Russian Invasion” and now it all makes sense….They need money….Thanks for the info as usual Wolf….

    • nick kelly says:

      Norway does not make money from NATO. Membership costs Norway a lot of money.
      Whether or not that is a sound investment is probably best judged by the Norwegians, who are not in a nice safe neighborhood a long long ways away.

      • Stavros Hadjiyiannis says:

        Norway’s gas production will soon start falling. With Russian gas in plentiful supply, the decline and eventual demise of the Norwegian gas industry will only accelerate. There’s your answer.

        • nick kelly says:

          The Russians may need Norwegian expertise to develop more gas.
          Incredibly, after 15 years of Putin, 12 of them riding high prices, they are still not self-sufficient in oil and gas field equipment.

        • Jim Graham says:

          “”Norway’s gas production will soon start falling. With Russian gas in plentiful supply, the decline and eventual demise of the Norwegian gas industry will only accelerate.””

          Add the dropping price of nat gas to the mix.

  5. Stevedcfc72 says:

    Agreed Maximus ref cheap electricity.

    On the UK news yesterday were five huge offshore wind turbines being delivered to Scotland from Norway.

  6. Willy2 says:

    – Two remarks:
    1) What happened to norwegian wages in the same time frame ?
    2) In the article you mentioned once the USDNOK rate and once the NOKUSD rate, I assume that you mean the USDNOK rate in both cases ?

  7. Petrus says:

    The NOK has already crashed from 5 (in 2007) to 8 (2017) against the USD – it was as a low as 8.7 NOK to the USD (2016). And – the currency will depend more on the oil price – it always has.
    If there is a bust in the property market in Oslo – which will come – then that could destabilize the banks – but this is the same all over Europe. The big question is if the currency is the escape valve.

    • Gershon says:

      The massive migrant influx into Scandinavia will surely remedy this bleak situation – our globalist overlords and their media border collies said so.

  8. Nicko2 says:

    Norway will be fine, their sovereign wealth fund, the largest in the world, is nearly a trillion dollars.

    FYI, farmed salmon is toxic, full of antibiotics and pesticides – go for ‘sustainable’ ocean caught canned Alaskan or Canadian salmon.

    • Maximus Minimus says:

      Better yet, eat organic vegetarian food. There is no need to pass food through salmon’s guts. Yuck.

    • JB says:

      good point on Norway’s sovereign wealth fund . They have
      a tidy nest egg. Attribute it to good fiscal planning . Other countries should take notice .

      I am looking forward to more international articles .

  9. Mad Max says:

    People don’t realize that the energy sector in Norway accounts for more of their GDP than in Russia. Something is going on in Norway that is not getting the attention it should. Per capita tax receipts are down something like 30%.


  10. Gershon says:

    I’m reading “The Children’s Blizzard” by David Laskin, an account of the 1888 blizzard on the Great Plains that killed hundreds, mostly children of newly-arrived Norwegian and German immigrants that the railroad companies had conned into homesteading in America. Norway had bleak economic prospects for young people back then – history may be getting ready to repeat itself.

    • Nicko2 says:

      Norway is one of the wealthiest and technologically forward-minded countries on the planet. Honestly, this is crazy talk.

Comments are closed.