Sweden: Economy enters technical recession in Q3
A second national accounts release showed the Swedish economy entered a technical recession in the third quarter of 2023, when GDP declined by 0.3% on a seasonally adjusted quarter-on-quarter basis. While this fall was an improvement from the 0.8% decline posted in Q2, it was a deterioration from the flat reading reported in the preliminary release.
The smaller quarterly contraction was due to a positive contribution from the external sector amid improving exports.
Domestically, private consumption fell 0.6% in the third quarter, which was a deterioration from the second quarter’s 0.3% contraction. Similarly, fixed investment contracted 0.6% in Q3 (Q2: -0.1% s.a. qoq), marking the worst result since Q4 2022. Lastly, public consumption decelerated and flatlined in Q3 (Q2: +0.4% s.a. qoq).
On the external front, exports of goods and services expanded by a seasonally adjusted 1.4% quarter on quarter in Q3, improving from Q2’s flat reading and marking the best performance in a year. Conversely, imports of goods and services deteriorated, contracting 1.5% in Q3 (Q2: +0.4% s.a. qoq). Consequently, the external sector contributed 1.5 percentage points to the overall reading.
On a year-on-year basis, economic activity declined at a quicker rate of 1.4% in Q3, following the previous period’s 0.4% fall. Q3’s reading marked the largest decrease since Q2 2020.
Our Consensus is that the economy will contract again in sequential terms in the final quarter of 2023, which would confirm the anticipated 2023 GDP contraction—the only one among the Nordic economies.