Image: The European Central Bank in Frankfurt by Charlotte Venema on Unsplash. "Inflation has come down from its peaks, both in the US and in the euro area and currently we also see wage pressures becoming less significant in the euro area. This paves the way for central banks to gradually start cutting rates," says Heidi Schauman, Global Head of Research.

After years where the abnormal was the new normal, it now seems that economies are moving towards more normal conditions.

The Corona crisis was followed by an inflation crisis with corresponding significant interest rate increases, which created uncertainty and difficult conditions for growth.

But according to the latest edition of Nordic Outlook, we are now moving towards more normal economic indicators. Inflation is getting under control, there are prospects for interest rate cuts, and this also lays the groundwork for more stable growth in the Nordic countries.

"Inflation has come down from its peaks, both in the US and in the euro area and currently we also see wage pressures becoming less significant in the euro area. This paves the way for central banks to gradually start cutting rates," says Heidi Schauman, Global Head of Research.

But even though we are moving towards more normal conditions, there are still risks, although this time it does not seem to be about inflation.

"When you look at the risk picture – there has been a slight tilt towards more risks of a more rapid slowdown of the economy, while we see less risks related to sticky inflation and high wage pressures," says Heidi Schauman.

See Heidi Schauman explain more in this video:

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Denmark: Growth and Hesitant Consumers
Novo Nordisk is still a significant player when it comes to growth in Denmark, but they are not alone and other areas are also showing progress. Excluding the pharmaceutical industry, the GDP shows growth of 1.3 percent against an overall GDP of 2.5 percent.

The decent growth, however, also means that the potential for further increases is more limited. There is still room for growth in private consumption, but the crises of recent years have eaten into the Danes' savings, and Danes continue to be cautious about really increasing consumption.

Inflation is still low in Denmark – and also lower than in the rest of Europe – but quite significant wage increases may push inflation a bit higher in the coming period.

Sweden: A Two-Speed Economy
The Swedish economy has fared well through the first half of 2024. As before, private households and the housing market are the weak points. However, Swedish households can look forward to both lower interest rates and lower income taxes, which are expected to give real wages a significant boost. However, it is uncertain whether this boost is enough to offset the significant decline in real wages in recent years.

Foreign trade, on the other hand, remains strong, and employment is stable, while unemployment is rising. Inflation continues to fall, and it is expected that this trend will continue. Looking at house prices, they have risen by about 5 percent in 2024, but if you exclude seasonal variations, the increases are more moderate at 2.5 percent.
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Norway: Next Year Will Be Better
In Norway, growth is still slightly below level, but there are signs of an increase in growth in 2025. The growth forecast in Nordic Outlook has been adjusted down from 1.1 percent to 0.7 percent in 2024, mainly due to a weaker start to the year than originally expected.

On the other hand, there is a prospect of a more significant upswing in 2025 with an expectation of growth of 2.1 percent.

In terms of income, private consumption is still high, which means limited potential for growth through consumption. Unemployment is still low, but there are signs that unemployment is increasing, while inflation continues to decrease.

Finland: Signs of a Turnaround Ahead
Finland is slowly coming out of recession. Falling interest rates and low inflation help increase domestic demand, but the risk of unemployment still holds consumers back.

Unemployment looks set to rise until economic growth is secured, thereby creating a greater need for employees. At the same time, wages appear to be rising faster than in recent years. Looking at the flow of export orders, it remains sluggish in the short term, but growth in export markets increases export demand.

The construction of new homes seems to be bottoming out at a low level, and an upswing can be expected in 2025. The housing market has also stabilized, and the number of transactions increased over the summer.