Sweden: Economy rebounds in Q4 on strong exports and recovering consumption
February 28, 2019
According to data released by Statistics Sweden (SCB) on 28 February, the economy grew 1.2% in seasonally adjusted terms in the fourth quarter over the third quarter. This contrasted Q3’s revised 0.1% decline (previously reported: -0.2% quarter-on-quarter) and confounded market expectations of a 0.6% uptick. The reading, however, benefited from a weak base effect, as the economy contracted for the first time in over five years in the previous quarter.
The strong Q4 print came on the back of a broad-based recovery in both domestic and external demand, with the latter performing particularly well and driving up the headline print. Household consumption rebounded from Q3’s 0.8% qoqsa contraction to log 0.7% growth in Q4, while government spending accelerated from Q3’s 0.2% qoqsa growth to 0.6% in Q4. On the other hand, investment momentum remained feeble in the fourth quarter after two poor readings in Q2 and Q3, which was the weak spot of this GDP release. Fixed investment contracted 1.6% qoqsa in Q4, contrasting Q3’s muted 0.1% growth. This was likely due in good part to falling home prices in the quarter—a key economic driver—which weighed on residential construction investment. However, inventories were replenished throughout Q4, contributing 0.3 percentage points to the headline print (Q3: -0.2 percentage points)
Turning to the external sector, exports of goods and services surged 3.1% qoqsa (Q3: +0.6% qoqsa). Imports, meanwhile, rose by a more modest 1.4%, after contracting 0.5% in the previous quarter. As a result, the external sector’s net contribution to growth rose from 0.5 percentage points in Q3 to 0.8 percentage points in Q4.
Sweden GDP Forecast
The Riksbank expects the economy to grow 1.3% in 2019 and 1.9% in 2020. Our panelists expect GDP to expand 1.6% in 2019, which is down 0.1 percentage points from last month’s forecast, and 1.8% in 2020.
Author: Joffrey Simonet, Economist