Denmark Economic Forecast

The economy grew at quicker-than-initially-estimated quarterly and annual paces in Q2. That said, quarter-on-quarter growth more than halved from Q1 due to softer growth of public spending and exports of goods and services. More positively, private consumption growth doubled in Q2 from Q1 to reach the strongest reading since Q4 2021; softer inflation and higher employment supported the acceleration. Moving to Q3, quarterly growth is set to slow marginally. Both goods imports and retail sales declined month on month in July, suggesting a slowdown in household spending. That said, consumer and business sentiment improved in July–August from Q2—despite remaining pessimistic—likely due to receding consumer and core inflation and a steeper year-on-year decline in producer prices in the same two-month period.

Headline inflation dropped to a near two-year low of 2.4% in August (July: 3.1%). Similarly, core inflation softened to 4.2% in the same month (July: 5.3%). In the final months of the year, headline inflation should drop further from current levels on high interest rates. Overall, in 2023, inflation will average lower than in 2022 but remain above the ECB’s 2.0% target.