Denmark: Economy rebounds in Q4 following the worst quarterly performance in six years
According to an estimate released by Statistics Denmark, the economy recovered in the fourth quarter, after recording the worst quarter-on-quarter performance since Q3 2011 in the previous quarter. In seasonally-adjusted quarterly terms, the economy grew a revised 1.0% (previously reported: +0.9% quarter-on-quarter), bouncing back from the 0.8% contraction recorded in Q3. In annual terms, growth in Q4 accelerated to 1.2%, up from 0.9% in Q3. The fourth-quarter performance brought growth for 2017 to 2.1%. However, Statistics Denmark noted that this full-year figure includes a one-off patent payment from U.S. biotech firm Biogen, which boosted growth by 0.4 percentage points, and may be reclassified in a forthcoming GDP revision.
The domestic side of the economy performed reasonably well. Private consumption grew 1.3% qoq, following a 1.1% contraction in Q3, which had in good part been due to a change in the car tax enacted in September that dampened purchases of vehicles in the months before. Taking this into account makes the headline consumption growth figure seem more modest, as some analysts had expected a larger rebound. Fixed investment growth slowed to 1.0% in Q4, down from 1.4% in Q3, despite a sharp upswing in investment in housing, which partly offset a decline in facilities and machinery investments. On the other hand, government spending accelerated markedly from Q3’s 0.1% quarter-on-quarter growth to 1.0% in Q4, providing a welcome boost to headline growth.
Meanwhile, the external sector’s performance was mixed. Exports grew 1.3%, after contracting 0.7% in Q3; however imports grew at a faster rate of 2.5% (Q3: -0.3% qoq). Consequently, the external sector deducted from growth in the quarter.
Looking ahead, growth will likely be moderate. A tight labor market will support rising household purchasing power thanks to stronger wage growth, while accommodative monetary policy should keep buttressing fixed investment over the medium-term. However, despite the current dynamism of Denmark’s main European trade partners, the external sector is expected to soften somewhat.