Sweden: Comprehensive data shows economy expanded meekly in Q1
The economy expanded 0.1% in the first quarter of 2020 in seasonally-adjusted terms, according to revised estimates, up from both the preliminary reading of a 0.3% contraction and the flat reading for the fourth quarter of 2019. In calendar-adjusted year-on-year terms, the economy expanded 0.4% in Q1 2020 (previously reported: +0.5% year-on-year; Q4 2019: +0.5% yoy).
Economic activity in the first quarter appeared healthy in the first two months, judging from business and consumer confidence data, and manufacturing and services sector PMIs, but deteriorated significantly from March, when social distancing notices came into place.
The quarter-on-quarter economic expansion in Q1 was due to a robust increase in exports of goods and services (Q1 2020: +3.4% quarter-on-quarter; Q4 2019: -2.3% qoq), and a decrease in imports (Q1 2020: -0.2% qoq; Q4 2019: -1.8% qoq). As a result, the external sector contributed 1.7 percentage points to the headline expansion, contrasting the 0.3 percentage-point subtraction in Q4 2019.
On the domestic front, private consumption fell 1.7% in Q1, contrasting the 0.4% growth in Q4, and fixed investment shrank 0.9%, contrasting the 0.4% growth recorded in Q4; both consumer and business confidence held up well in January–February, but slumped in March. Meanwhile, government consumption dropped 0.3%, following a 0.1% drop in Q4.
Economic conditions are likely deteriorating rapidly in Q2. The full effects of social distancing measures will hamper economic activity. Moreover, the global economic downturn will hit the external sector of Sweden’s relatively open economy. Nevertheless, supportive fiscal and monetary policy will cushion the downturn.