Denmark: GDP records marginal contraction in the first quarter
A second national accounts release confirmed that momentum was set back in the first three months of the year: GDP contracted 0.1% on a seasonally-adjusted quarter-on-quarter basis in the first quarter, below the 3.0% expansion logged in the fourth quarter of last year. Q1’s reading marked the weakest reading since Q2 2020. Meanwhile, on an annual basis, economic growth moderated to 6.7% in Q1 (Q4: +6.8% yoy), slightly below Q1’s preliminary reading.
The marginal quarterly contraction was largely due to private consumption sliding at a steeper pace of 1.2% in seasonally-adjusted quarter-on-quarter terms in Q1, following a 0.7% contraction in Q4. The result came on the back of the reinstatement of Covid-19 containment measures as the Omicron variant started spreading in December 2021. Additionally, mounting price pressures dampened spending. However, the 1.0% increase in employment levels likely prevented a larger decline in spending. Moreover, government spending dropped, contracting 1.8% in Q1 (Q4 2021: +2.6% s.a. qoq). The reduction in public expenditure was largely due to a statistical effect; it had been elevated in the final quarter of last year. Fixed investment growth accelerated modestly to 2.6% in Q1, from the 2.4% expansion recorded in the previous quarter.
On the external front, exports of goods and services contracted 1.1% in Q1, marking the worst result since Q2 2020 (Q4 2021: +4.8% s.a. qoq). Similarly, imports of goods and services also swung into a contraction, declining 2.1% in Q1 (Q4 2021: +1.1% s.a. qoq).