Sweden: GDP records sharpest contraction since Q2 2020 in the first quarter
Underlying momentum faltered in the first three months of the year, as GDP declined 0.8% on a seasonally-adjusted quarter-on-quarter basis in the first quarter, worsening from the 0.4% decline reported in the preliminary estimate and swinging from the 1.2% expansion tallied in the fourth quarter of last year. Q1’s reading marked the worst result since Q2 2020. Meanwhile, on an annual basis, economic growth moderated to 3.0% in Q1, following the previous period’s 5.1% growth. Q1’s reading was the weakest since Q1 2021.
The downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Household spending contracted 0.4% in Q1 (Q4 2021: +1.4% s.a. qoq), marking the worst result since Q2 2020. While employment levels increased by 0.8% in the first quarter and households’ real disposable income rose, the continued buildup of inflationary pressures throughout the first quarter likely eroded individuals’ and families’ purchasing power, dampening spending. Additionally, government consumption dropped at the sharpest pace since Q2 2020, contracting 0.3% (Q4 2021: +0.1% s.a. qoq). Furthermore, fixed investment contracted at a more accelerated pace of 1.3% in Q1, marking the worst result since Q2 2020 (Q4 2021: -0.2% s.a. qoq).
Meanwhile, the external sector detracted from the overall reading. Exports of goods and services growth fell to 1.0% in seasonally-adjusted quarter-on-quarter terms in Q1, marking the weakest reading since Q2 2021 (Q4 2021: +3.2% s.a. qoq). Conversely, imports of goods and services growth sped up to 2.8% in Q1 (Q4 2021: +1.3% s.a. qoq). Consequently, the external sector detracted 0.7 percentage points from the overall reading, contrasting the 0.9 percentage point contribution from the prior quarter.