Denmark: Third estimate sees minor upward revision to Q4 GDP print; 2018 growth upgraded notably
According to a third estimate released by Statistics Denmark on 29 March, the economy grew a revised 0.8% in seasonally adjusted quarterly terms in the fourth quarter of 2018 (previously reported: +0.7% qoqsa), accelerating from Q3’s 0.4% growth. In annual terms, GDP growth came in at 2.6% in Q4 (previously reported: +2.2% year-on-year), down from the 2.4% reading recorded in Q3. All told, the economy grew an upwardly revised 1.4% in 2018 (previously reported: +1.2% yoy). While annual growth in 2018 cooled notably from 2017’s 2.3% expansion, Statistics Denmark notes this is in part due to several technical factors including the accrual of a patent payment in Q1 2017. The institute stated this is artificially inflating 2017 GDP and that revisions could see 2017’s growth revised down and 2018’s revised up as much as 0.4 percentage points.
The acceleration in Q4 was primarily driven by the domestic economy. Private consumption rose 0.4% qoqsa in the fourth quarter, accelerating from the flat print recorded in Q3 amid a tightening labor market and despite a continued decline of car purchases which have fallen consecutively for the last three quarters. Public consumption also fared well, rebounding 0.8% in Q4 (Q3: -0.7% qoqsa). On the other hand, fixed investment continued to fall, contracting 1.5% in Q4 (Q3: -12.8% qoqsa). Investment was particularly hit by a sharp fall in investment of intellectual property products, while residential investment moderated marginally. On the flipside, machinery and transportation investment recovered in the quarter.
Lastly, the external sector, while improving overall in the quarter, showed persistent weakness in external demand. Exports of goods and services rose 1.1% over the previous quarter in seasonally-adjusted terms in Q4, down from Q3’s 1.3% increase; although shipments of goods picked up modestly, services exports contracted and weighed on the print. Meanwhile, imports fell slightly in Q4 (Q4: -0.8% qoqsa; Q3: -5.1% qoqsa). A rebound in imports of goods was offset by a sharp contraction in imports of services. Overall, the external sector positively contributed to headline GDP growth in Q4.
Turning to 2019, the economy is expected to strengthen. A very tight labor market should push up wages and thus support consumer spending, while exports are expected to pick up after a lackluster performance in 2018. Nevertheless, risks remain skewed to the downside. Particularly, a slowdown in the Eurozone and uncertainty over Brexit could weigh on external demand and further dampen business confidence—which has been on a consistent downward trend—and thus growth in the export-oriented sectors, as well as investment prospects more generally.