These institutions will hold meetings with the representatives on behalf of Norges Bank. Region North is covered by Kunnskapsparken in Bodø. Companies in the north are reporting lower demand and deteriorating profitability. The same tendency can be observed in most industries with the exception of retail trade and construction. The krone exchange rate, combined with a costly wage settlement, has contributed to weakening competitiveness in internationally exposed industries. As a result, demand and turnover in sectors that supply goods and services to this industry have fallen markedly. Retail companies have recorded growth in turnover and solid profits in recent months, and our contacts expect this situation to continue over the next months. Some activity growth is being reported for the construction industry. The increase in activity primarily reflects higher public sector demand. Workforce reductions in both the public sector and manufacturing industry have been reported. More workforce reductions and lay-offs are planned for the period ahead. Developments in the Norwegian economy may prove to be weaker than projected in the October Inflation Report. In spite of the interest rate cuts and a stimulatory central government budget, overall economic policy has been tight because the krone has been strong. The weakening of the krone since January has, however, led to an easing of monetary policy. Several years of deteriorating competitiveness will, nevertheless, have a dampening impact on growth in the period ahead. The business confidence survey for manufacturing industry shows that manufacturing leaders’ sentiments about future developments are negative.
Over the past year, there has been  4  BIS Review 14/2003  extensive restructuring and downscaling, especially in the ICT sector and the airline industry. With the prospect of continued weak developments in the global economy and an uncertain stock market, reductions in capacity may still be necessary. The fall in share prices reflects weaker expectations concerning future earnings. This may prompt enterprises to postpone or cancel investment plans. When share prices are low, companies may also find that raising capital by means of new issues is not an attractive alternative. Strong growth in private consumption has contributed to sustaining activity in the Norwegian economy. Sharp wage growth, combined with reductions in direct and indirect taxes, resulted in close to 5% growth in household real disposable income last year. Real income growth will be considerably lower in 2003 and probably lower than projected earlier. Imbalances in the Norwegian electricity market have resulted in a sharp increase in electricity prices. This implies a considerable reduction in household real income growth. The interest rate reductions this winter will have the opposite effect. In addition, developments in employment are expected to be weaker and wage growth somewhat lower this year than previously projected. During the last six months, households have become less optimistic about the economic outlook. Increased uncertainty in the labour market and lower confidence point to heightened caution and increased saving in the household sector. Lower interest rates have the opposite effect. Household saving behaviour may also be affected by high electricity prices.