Denmark: New release confirms economy's resilient performance in Q2
September 29, 2017
Revised data confirmed the Danish economy continued to grow at a healthy pace in the second quarter, with GDP growth at 0.7% on quarter-on-quarter seasonally-adjusted terms. This was slightly above both the previously reported 0.6% increase and the 0.5% expansion recorded in the first quarter. In addition, the composition of growth showed a stronger domestic economy and weaker external sector than previously reported. In annual terms, GDP growth was 1.9% in Q2, which was below the 3.3% increase recorded in Q1 and the 2.7% expansion reported in the August GDP release.
The domestic sector saw uneven expansions across sub-components. Private consumption was confirmed to have recorded null growth in the second quarter as retail spending was scaled back, in spite of a tightening labor market. Fixed investment, however, followed the pick-up seen elsewhere in the Eurozone and rose 2.9% in Q2, contrasting the 2.1% drop recorded in Q1 and marking the best reading in five quarters. The previous release had shown fixed investment growth at a more moderate 1.7%. Q2 government consumption growth was upheld at 0.4%, half the increase seen in the previous quarter.
The external sector’s performance was more dismal. Robust domestic growth saw a pick-up in imports, which grew 2.1% over the previous quarter in Q2 (previously reported: +1.8% seasonally adjusted quarter-on-quarter; Q1: -1.2% s.a. qoq). Exports were confirmed to have grown 0.8% in Q2 following a 0.9% contraction in Q1, but the smaller increase meant that the external sector dragged on growth on Q2. The external sector’s net contribution to growth was minus 0.6 percentage points, which contrasted the 0.1 percentage-point contribution recorded in Q1.
The economy is expected to firm up in H2 as wage growth accelerates on the back of a tightening labor market and credit conditions remain supportive of growth on accommodative monetary policy. However, somewhat higher price pressures so far in the second half of the year could put a damper on private consumption growth.
Author: David Ampudia, Economist