For instance, the purchasing managers index for the manufacturing sector rose in both the euro area and Japan in October. Recent statistics thus indicate that international economic activity remains strong and that developments are largely in line with the assessment made in the Inflation Report. This also means that there may be less reason for concern over international developments than has sometimes been the case in recent years,” continued Mr Heikensten. ”With regard to the Swedish economy, we observed in October that economic activity had accelerated again after the slowdown at the beginning of the year. Exports were expected to show strong growth. The investment upturn that began last year was expected to continue, but gradually enter a calmer phase. Private consumption was also expected to rise more rapidly given, for example, a good growth in real wages, expansionary fiscal policy and a gradual increase in employment. All in all, we foresaw a fairly good growth rate and a normal economic cycle, where domestic demand would become more of a driving force. Given this background, we were assuming there would be a turnaround for the better in the labour market," said Mr Heikensten. "New data also largely confirm the earlier picture with regard to economic activity in Sweden. The most recent business tendency survey paints a bright picture of the situation in most sectors included in the survey, and foreign trade statistics indicate stronger growth in exports.
Mainland fixed investment has gradually become an important driving force behind the upturn. Investment has picked up in most industries and growth was stronger than expected towards the end of 2004. Norges Bank’s regional network has registered rising investment in all industries. Petroleum investment in particular appears to be growing at a faster pace than projected. This may continue to boost mainland output. High wage growth in Norway relative to other countries and a periodically high krone have weakened the profitability of Norwegian export companies and dampened export growth. Growth in traditional exports has nevertheless picked up in the past two years. Prices for many of our main export goods have risen as a result of strong growth in new markets. However, growth in Norway’s total exports, excluding oil and gas, is lower than import growth among our trading partners. The fall in interest rates has pushed up house prices. Turnover in the housing market has been high. High resale home prices have made it more profitable to build new homes, and residential construction is rising. Higher housing wealth provides increased borrowing opportunities and thereby also boosts demand for consumer durables. Household debt has risen by around 11 per cent over the past year. Credit demand in the enterprise sector remains low. Despite the strong upturn in the mainland economy, the rise in the number of employed has been fairly modest. Productivity rose sharply in the first few quarters after economic growth picked up. Normally, strong productivity growth is gradually followed by an increase in employment.