Sweden: GDP growth remains solid in the first quarter
According to figures released by Statistics Sweden on 30 May, the economy expanded a robust 0.7% in Q1 over the prior quarter, matching Q4’s revised reading (previously reported: +0.9% quarter-on-quarter). The expansion beat market expectations and was markedly above the EU average of 0.4%. Growth clocked 3.3% in working-day adjusted year-on-year terms, up from Q4’s 2.9%.
The domestic economy drove Q1’s performance. Private consumption grew 0.8% qoq (Q4: +0.7% qoq), buoyed by a strong labor market. Fixed investment surged (Q1: +2.8% qoq; Q4: -0.8% qoq) on optimistic business sentiment and easy credit conditions, while government consumption ticked up 0.1% (Q4: +0.2% qoq).
On the external front, exports contracted 0.2% on a tough prior quarter comparison (Q4: +2.0% qoq), while imports rose 1.0% (Q4: +1.0% qoq), indicative of solid domestic demand. As a result, the external sector didn’t contribute to growth, following a plus 0.5 percentage point contribution in the fourth quarter.
Going forward, growth is likely to continue outpacing the EU average despite weaker residential investment, as high levels of capacity utilization and strong sentiment spur business investment in other sectors, while solid global trade boosts exports. However, the economy is still likely to cool gradually in line with other European countries. Elevated household debt levels pose a downside risk, particularly as monetary conditions begin to tighten.