March 7, 2017 / 10:06 AM / 6 months ago

UPDATE 1-Norway's economic prospects improving, say firms; crown jumps

(Adds crown, economists)

OSLO, March 7 (Reuters) - Norwegian companies expect their businesses to grow faster over the next six months, a central bank survey showed on Tuesday, sending the crown currency higher as economists said the chance of a rate cut is receding.

The Norwegian economy is slowly picking up after a two-year slowdown in its top industry, oil production, due to a halving of crude prices since mid-2014. In recent months, crude prices have risen and stabilised at around $55 per barrel.

The regional network survey of 327 companies is the central bank's primary sentiment gauge and usually forms the backbone of its rate decisions and interest rate forecasts. The next rate decision is due on March 16.

"Output growth is primarily being generated by higher public demand. Growth has picked up in all sectors, except for the export industry," the bank said in the survey, which also reported that business activity had grown moderately over the past three months.

The crown currency strengthened following the survey, trading at 8.9348 per euro at 0913 GMT against 8.9788 beforehand.

"Now we are moving into a phase where there is no need to cut interest rates, we are heading towards a tightening bias," said Frank Jullum, chief economist at Danske Bank.

"There is improvement in all sectors. It is a combination of less headwinds in the oil industry, as a result of higher oil prices. And there is strong growth in the rest of the industry."

The central bank's key policy rate is at 0.50 percent. It has said it expects that rate to stay at that level "in the period ahead".

Still, weaker-than-expected inflation in February suggested the chance of a further rate cut was still there.

"This strengthens our belief that there won't be further rate cuts, but it will still be a while before rates rise," said Erik Bruce, chief analyst at Nordea Markets. (Reporting by Gwladys Fouche, Nerijus Adomaitis and Ole Petter Skonnord; editing by John Stonestreet)

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