Norwegian consumption weakens, prompts dilemma on interest rates
* Retail sales -1.3 pct mo/mo vs forecast for +0.2 pct
* Goods consumption -2.0 pct mo/mo
* Seasonally adjusted jobless rises
OSLO, Aug 30 (Reuters) - Norwegian retail sales and goods consumption tumbled in July while seasonally adjusted unemployment ticked up, data showed on Friday, leaving the central bank with a dilemma over interest rates.
The bank earlier said there was a 50 percent chance it would cut rates in September but weak household demand and rising inflation are pulling it in opposing directions.
Retail sales fell 1.3 percent from the previous month, even as analysts expected a 0.2 percent increase, while goods consumption, a broader measure of household behaviour, fell 2.0 percent on the month.
"Overall, this confirms the weaker growth outlook and the central bank will probably lower its growth outlook while lifting its inflation expectations," Steinar Juel, an economist at Nordea said.
The registered unemployment rate stayed at 2.8 percent but once the figures are adjusted for seasonal factors, they showed a small rise and employment agency NAV predicted a "moderate" rise in unemployment through the autumn.
Annual core inflation, a figure watched by the central bank, jumped to 1.8 percent in July from 1.4 percent the previous month, well ahead of forecasts for 1.2 percent, and analysts said they expect a high figure from August as well.
Inflation is still well below the central bank's 2.5 percent target but the recent rise, caused by surging energy, travel and food prices, indicates it will be reached much more quickly than earlier expected.
Norwegian consumption was anaemic in the second quarter, dragging quarterly economic growth to 0.2 percent, well below expectations for 0.7 percent and even below the long-struggling euro zone's 0.3 percent.
"All things being equal, this is a softish message for the September monetary policy report," Stein Bruun, an economist at SEB said.
"But inflation has been surprising and the currency is weaker than what Norges Bank had forecast. Those last two factors suggest they will lift the near-term rate path a bit in the next monetary policy report." (Reporting by Balazs Koranyi, Gwladys Fouce and Joachim Dagenborg; editing by Stephen Nisbet)
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