Norway retail sales dive bolsters rate cut view

By John Acher

OSLO, Dec 1 (Reuters) - Norwegian retail sales dropped by a steeper-than-expected 0.9 percent in October from September as the global economic crisis kept shoppers at home, and economists said the weakness would support further interest rate cuts.

'Norwegians are shopping less,' Statistics Norway said in a statement. 'Nearly all business sectors have experienced a decrease from September to October this year.'

The drop in the seasonally adjusted volume index in October followed a decline of 0.4 percent in September and was steeper than a median expectation of a 0.3 percent fall in a Reuters poll of economists.

Economists said that the weakness in private consumption reinforced expectations that the central bank, Norges Bank, will cut interest rates again at its Dec. 17 meeting.

The bank cut interest rates twice in half-point steps in October to 4.75 percent from 5.75 percent to stave off the worst effects of the global economic crisis and signalled that rates will fall further.

Up to now, economists have been divided in their expectations for the bank's December meeting, with some forecasting a 25 basis points decrease and others 50 bps.

'Retail sales was clearly weaker than expected...so I would say this points towards giving Norges Bank the ammunition it needs to cut aggressively at its meeting in December,' said Knut Anton Mork, chief economist at Handelsbanken in Oslo.

Mork, who has forecast a 50 bps cut, added: 'I have a hard time envisaging a 75 basis point cut. But if other central banks start cutting by 75 basis points, then the arguments increase for making larger cuts.'

Kyrre Aamdal, senior analyst at DnB NOR Markets said: 'We forecast a 25 basis point cut in December, but the data that are coming increase the chances of a 50 basis point cut.'

The weak sales figures came along with data showing that credit growth eased in October to an annual rate of 11.9 percent from 12.1 percent in September, which was more robust than economists average expectation of a fall to 11.2 percent.

'I think Norges Bank will put most emphasis on the consumption figures, and these were on the weak side,' said Nordea Markets senior economist Erik Bruce. 'It is now clear that consumption is developing very weakly in Norway.'

The Norwegian softened to 8.8925 per euro by 0956 GMT from around 8.8730 before the data.

(Additional reporting by Aasa Christine Stolz and Camilla Knudsen; Editing by Victoria Main) Keywords: NORWAY RETAIL/CREDIT ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.