The large investments in this sector in the latter half of the 1990s has led to a high vacancy rate. Statistics Norway’s new price index for office and commercial property shows that in Norway as a whole, prices peaked in the first half of 2001 and have since fallen by over 9 per cent up to end-June 2003. This situation is likely to curb overall investment growth in the years ahead. In 2004, many companies will probably realise the gains provided by the efficiency measures that have been implemented. Continued brisk growth in household demand is expected to boost investment activity in 2005 and 2006. Petroleum investment will also increase as a result of the  4  BIS Review 23/2004  development of onshore and offshore infrastructure in order to produce gas from the Ormen Lange field. At the end of January and beginning of February, our contacts in Region North reported rising demand and output for most industries since autumn 2003. There are prospects of strong growth in all industries except manufacturing for the domestic market. The export industry, however, reported that demand growth is moderate. Restructuring has contributed to growth in the fisheries. High activity in the metals industry is also contributing to increased activity among enterprises providing services to this industry. For the construction industry, demand growth is high. Retail trade continues to show high growth in activity. Developments in the service sector are also positive. Substantial growth in investment, however, is not expected.

The largest contribution to annual growth in the third quarter came from private sector demand through consumption and investment; whereas, due to the contraction in exports and the acceleration of demand for imported goods, the net foreign demand contributed to annual growth negatively. Thus, the divergence between domestic and foreign demand growth has become evident (Figure 18). BIS central bankers’ speeches  9  Recent data releases indicate that the third-quarter slowdown in economic activity is temporary. The composition of economic activity suggests that the divergence between domestic and foreign demand continued in the fourth quarter. Domestic demand for imported goods accelerated in the last quarter amid rapid credit expansion and lagged effects of the appreciation of the Turkish lira in the third quarter. As a result, the current account balance continued to deteriorate (Figure 19). The slow recovery in the global economy continues to restrain economic activity, whereas the strong domestic demand bolsters aggregate demand growth. In fact, the sharp upward trend in private consumption and investment spending that started in the fourth quarter of 2009 continued into the fourth quarter of 2010 (Figure 20). Continued economic recovery fueled by robust domestic demand has supported the gradual improvement in employment conditions. The rapid recovery in non-farm employment paused in the third quarter of 2010, which appears temporary, as suggested by leading indicators  10  BIS central bankers’ speeches  (Figure 21). However, due to high labor force participation rates, it will take a while before unemployment rates come down to precrisis levels (Figure 22).