Norges Bank

1

Executive Board meeting3 November 2004

Norges Bank

2

Economic developments

Norges Bank

3

Industrial output in the US, Japan and the euro areaThree-month moving average. Seasonally adjusted. Volume

-5

-4

-3

-2

-1

0

1

2

3

4

5

1997 1998 1999 2000 2001 2002 2003 2004

-5

-4

-3

-2

-1

0

1

2

3

4

5

Sources: EcoWin/Federal Reserve Board, Ministry of Economy,Trade and Industry and EUR-OP/EUROSTAT

US

Japan

Euro area

Norges Bank

4

Employment in the US, Japan, Germany, the UK and Sweden. 12-month rise

-2

-1

0

1

2

3

4

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

-2

-1

0

1

2

3

4

Source: EcoWin/National statistics

US Sweden

Germany

Japan

UK

Norges Bank

5Source: EcoWin / National Bureau of Statistics China

China - GDPSo far this year. Percentage change on same month previous year

0

3

6

9

12

15

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

0

3

6

9

12

15

Norges Bank

6

Prices for some important commodities, measured in USD. Index. 2.1.2003 = 100. Daily figures

60

100

140

180

220

260

Jan 03 May 03 Sep 03 Jan 04 May 04 Sep 04

60

100

140

180

220

260

Sources: Norges Bank and Ecowin/ London Metal Exchange, The Economist

Copper

Aluminium

Oil

NickelLead

Zinc

The Economist's commodity price index

Norges Bank

7

Interest rate expectations Actual developments and expected key rate1) at 24 June and 28 October 2004. 2 January 2003 – 1 August 2006

0

1

2

3

4

5

6

2003 2004 2005 2006

0

1

2

3

4

5

6

UK

Euro area

US

24 June28 October

1) FRA and futures contracts adjusted for the estimated difference between 3-month money market rates and the key rate.

Sources: Bloomberg, Reuters and Norges Bank

Norges Bank

8

Forward interest rates29 October 2004. Implied short-term forward rates

0

1

2

3

4

5

6

2004 2006 2008 2010 2012 2014

0

1

2

3

4

5

6

Norway Euro area UK US

Source: Norges Bank

Norges Bank

9

Oil price Brent Blend USD per barrel. Daily figures

0

10

20

30

40

50

60

2002 2003 2004 2005 2006 2007

0

10

20

30

40

50

60

Sources: Norges Bank, Telerate and IPE

Futures prices 24 June (IR 2/04)

28 October

10 September

Norges Bank

10

Spread Brent-Dubai and WTI-Brent14-day moving average. USD per barrel

-2

0

2

4

6

8

10

12

14

2001 2002 2003 2004

-2

0

2

4

6

8

10

12

14

Sources: EcoWin AB

Spread Brent and Dubai

Spread WTI and Brent

Norges Bank

11

Oil futures pricesUSD per barrel light crude. Daily figures

10

20

30

40

50

60

2001 2002 2003 2004

10

20

30

40

50

60

Sources: Norges Bank and EcoWin/NYMEX

Delivery in 6-7 years

Delivery in 1 month

Norges Bank

12

OPEC 10 spare capacityMillion barrels per day

0

1

2

3

4

5

6

7

8

2000 2001 2002 2003 2004

0

1

2

3

4

5

6

7

8

Sources: EIA (annual figures) and IEA (monthly figures)

Monthly figures

Annual figures

Norges Bank

13

CPI-ATETotal and broken down into imported and domestically produced

goods and services1). Historical price inflation and projections IR 2/04 (broken line).12-month rise. Per cent

-5

-4

-3

-2

-1

0

1

2

3

Jul 03 Oct 03 Jan 04 Apr 04 Jul 04 Oct 04

-5

-4

-3

-2

-1

0

1

2

3

Sources: Statistics Norway and Norges Bank

Goods and services produced in Norway (0.7)

1) Norges Bank's estimates

Imported consumer goods (0.3)

CPI-ATE

Norges Bank

14

85

90

95

100

105

Jan 02 Jun 02 Nov 02 Apr 03 Sep 03 Feb 04 Jul 04

85

90

95

100

1051)A rising curve denotes a stronger krone exchange rate

Source: Norges Bank

Developments in the krone exchange rate1) (I-44)Daily figures. 1 January 2002 – 1 November 2004

Norges Bank

15

House pricesNEF/ECON (Januar 1998–October 2004) and SN (98 Q1– 04 Q3). Percentage rise on same period previous year

-5

0

5

10

15

20

25

30

1998 1999 2000 2001 2002 2003 2004

-5

0

5

10

15

20

25

30

Sources: Statistics Norway (SN), Norw. Association of Real Estate Agents (NEF), Association of Real Estate Agency Firms

SN

NEF

Norges Bank

16

Building starts - dwellings and other buildings1000 m2 per month. Trend. January 2000 - August 2004

100

150

200

250

300

350

400

2000 2001 2002 2003 2004

100

150

200

250

300

350

400

Housing starts

Other building starts

Source: Statistics Norway

Norges Bank

17

Price index for office and commercial propertyIndex 2000 = 100. 1st half of 1996 – 1st half of 2004

60

70

80

90

100

110

120

130

1996 1997 1998 1999 2000 2001 2002 2003 2004

60

70

80

90

100

110

120

130

Source: Statistics Norway

Norges Bank

18

Credit from domestic sources to households and non-financial enterprises (C2). Percentage growth on same month previous year. August 2001 – September 2004

-3

0

3

6

9

12

15

Aug 01 Jan 02 Jun 02 Nov 02 Apr 03 Sep 03 Feb 04 Jul 04

-3

0

3

6

9

12

15

C2 non-financial enterprises

Source: Norges Bank

C2 total

C2 households

Norges Bank

19

0

3

6

9

12

15

0

3

6

9

12

15

Local government revenues, underlying spending growth over the central government budget and mainland GDP Percentage change in value from 2003 to 2005

Source: National Budget 2005

Local governmentRevenues Spending

Central governmentGDP

Mainland Norway

Norges Bank

20

Developments in employment and output

four quarters after the start of a cyclical upturn1). Mainland Norway. Per cent

0

1

2

3

4

0

1

2

3

4

1) We have assumed that the previous cyclical upturns began in 1982 Q4 and 1991 Q4. The current cyclical upturn started in 2003 Q2.

Mainland GDP

Previous

Now

PreviousNow

Number employed

Sources: Statistics Norway and Norges Bank

Norges Bank

21

0

1

2

3

4

5

6

7

8

2001 2003 2005 200780

85

90

95

100

105

110

2001 2003 2005 2007

3-month money market rate

Forward interest rate 28 Oct (IR 3/04)

Source: Norges Bank

Import-weighted exchange rate, I-44

Forward exchange rate 28 Oct (IR

3/04)

1) A rising curve denotes a weaker krone exchange rate

Assumptions for money market rates and the krone exchange rate I-441)

(forward interest rate and forward exchange rate)

Forward interest rate 24 June (IR 2/04)

Forward exchange rate 24 June

(IR 2/04)

Norges Bank

22

Projections and uncertainty for CPI-ATE1)

12-month rise. Per cent. January 2001– December 2007

0

1

2

3

4

5

2001 2002 2003 2004 2005 2006 2007

0

1

2

3

4

530% 50% 70% 90%

1) The bands in the fan indicate different probabilities for developments in the CPI-ATE.

Sources: Statistics Norway and Norges Bank

Norges Bank

23

Projections for the CPI-ATE1) and the output gap2)

Inflation Report 2/04 (blue) and 3/04 (red). Per cent

-2

-1

0

1

2

3

-2

-1

0

1

2

3

2002 2003 2004 2005 2006 2007

1) CPI-ATE: CPI adjusted for tax changes and excluding energy products2) The output gap measures the difference between actual and trend mainland GDP

CPI-ATE

Output gap

IR 2/04IR 3/04

Sources: Statistics Norway and Norges Bank

Norges Bank

24

Projections for main macroeconomic aggregates IR 3/04

Source: Norges Bank

2004 2005 2006 2007

Mainland demand 4¼ 4 3½ 2¼

Private consumption 5 4½ 3¾ 2½

Public consumption 2 1¾ 1½ 1½

Gross investment 5¾ 5 5 2¾

Petroleum investment 12½ 15 5 -7½

Traditional exports 4 4½ 3 3

Imports 8½ 6 4 1¾

Mainland GDP 3¾ 3½ 2¾ 2

Employment ¼ 1¼ 1 ¼ ½

LFS unemployment (rate) 4½ 4 3¾ 3¾

CPI-ATE ¼ 1½ 1¾ 2¼

Annual wage growth 3¾ 4½ 4¾ 4¾

Output gap mainland Norway - ¼ ¾ 1 ½