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Sweden GDP Q4 2023

Sweden: GDP contracts again in Q4, undershooting market expectations

A second national accounts release revealed the Swedish economy fell deeper into a recession, shrinking 0.1% on a seasonally adjusted quarter-on-quarter basis and mirroring the third quarter’s result. The contraction was the third consecutive one, surprising markets on the downside and marking a deterioration from the 0.1% expansion reported in the preliminary estimate.

On an annual basis, the economy fell at a softer 0.1% in Q4 compared to the previous period’s 1.0% contraction. Q4’s result brought the economy to flatline overall in 2023; though better than expected, the reading was a deterioration from 2022’s 2.8% increase and the worst since 2012—barring 2020’s pandemic-induced downturn.

The quarterly result chiefly reflected private consumption growth hitting an over one-year high of 0.7% in the final quarter of 2023 (Q3: -0.5% s.a. qoq). Moreover, public consumption growth came in at 0.5% in Q4, following Q3’s flat reading. Less positively, fixed investment dropped at a more pronounced pace of 1.8% in Q4, from the 0.6% contraction recorded in the previous quarter.

Turning to the external sector, exports of goods and services deteriorated, contracting 0.1% in Q4 (Q3: +2.2% s.a. qoq). Conversely, imports of goods and services bounced back, growing 0.9% in Q4 (Q3: -0.7% s.a. qoq), marking the best performance in a year. Consequently, the external sector detracted 0.5 percentage points from the overall GDP reading.

Our panelists see the economy flatlining in quarter-on-quarter terms in Q1. Afterward, our Consensus is for sequential growth to make a comeback in Q2 and accelerate through Q4. While our panel expects the economy to grow overall in 2024, the recovery will be shallow as the Riksbank’s still-tight monetary policy stance continues to restrain economic activity.

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