Denmark: GDP growth softens marginally in the fourth quarter
A second national accounts release confirmed that the economy grew at a marginally softer pace of 1.1% in seasonally-adjusted quarter-on-quarter terms in Q4 (Q3: +1.2% s.a. qoq), as underlying momentum remained robust. Moreover, on an annual basis, the economy expanded 4.4%, up from the preliminary reading of 3.9% growth and accelerating from the previous quarter’s 3.7% increase. Consequently, GDP expanded 4.1% in 2021, up from the previously estimated 3.9% expansion, and recovering from 2020’s 2.1% pandemic-induced contraction.
The mild quarterly moderation was largely due to private consumption contracting 2.7%, contrasting Q3’s 2.7% expansion. Consumption in restaurants and culture declined, partly due to the reinstatement of some Covid-19 restrictions as Omicron first spread, although the consumption decline was also partly due to a base effect. However, a declining unemployment rate in the period (Q4: 4.5%; Q3: 4.8%) likely prevented a larger contraction. The drop in household consumption more than offset a softer contraction in fixed investment (Q4: -0.7% s.a.. qoq; Q3: -1.8% s.a. qoq), and a strong rebound in government spending in the quarter, with growth coming in at 2.5% (Q3: -3.9% s.a. qoq).
Turning to the external sector, exports of goods and services growth accelerated to 6.2% in the fourth quarter, up from 1.1% in Q3. Similarly, imports of goods and services expanded at a brisker pace of 2.6% in Q4 (Q3: +2.0% s.a. qoq).
With regard to the year ahead, analysts at the EIU commented:
“Private consumption, fixed investment and exports will drive overall growth. Private consumption is benefiting from the lifting of coronavirus controls, which in turn is boosting consumer confidence (feeding through to retail sales). Increased accumulated savings in 2020 that were only partially drawn down in 2021 will support private consumption in 2022 as pent-up demand is released. As business confidence picks up private fixed investment will continue to grow, and government capital projects in green and digital initiatives will underpin public fixed investment. A sustained recovery in global trade will fuel export growth across Europe, into which the export-oriented Danish industrial sector is strongly integrated.”