December 4, 2018 / 10:08 AM / 6 months ago

UPDATE 1-Strong Norway central bank survey supports rate hike in March

(Adds NOK move, quotes)

OSLO, Dec 4 (Reuters) - Norwegian companies are expecting the pace of output growth to rise further in the next six months following a solid performance during the latest three-month period, a central bank business survey showed on Tuesday, strengthening the crown.

Economists said the survey supported the view that the central bank would hike rates in March. The bank has said it expected to raise rates twice next year.

The central bank increased its key policy rate to 0.75 percent from 0.50 percent in September, the first rate hike in seven years.

The Norwegian economy has recovered strongly after a slump in the oil sector in 2014-16 due to low crude prices. The Nordic country is Western Europe’s largest oil producer.

“Network contacts point to increasing activity in the oil sector, higher public investment and digitalisation in both the private and public sector,” the bank said in the survey of 330 companies.

The Norwegian crown currency strengthened to 9.65 against the euro from 9.68 ahead of the release, before receding to 9.66 at 0956 GMT.

“The survey was slightly above expectations, and indicates growth around 0.75 percent for the two coming quarters, which is higher than the central bank has forecast,” Danske Bank Chief Economist Frank Jullum said.

“This means that rates definitely will be hiked in March, and we expect two more hikes next year,” he added.

DNB Markets analyst Kyrre Aamdal said the survey supported its view “that the weakness in GDP growth is temporary and that Norges Bank will hike the policy rate in March”.

The next rate meeting is on Dec. 13. (Reporting by Camilla Knudsen and Ole Petter Skonnord, editing by Gwladys Fouche and Ed Osmond)

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