Sweden: Economy loses steam in Q4
Economy disappoints markets again: The Swedish economy ended 2024 on a weaker footing, expanding at a softer 0.2% seasonally adjusted quarter-on-quarter clip in Q4, according to preliminary figures from Statistics Sweden. The reading fell short of market expectations and Q3’s 0.3% rise.
Seasonally adjusted GDP grew 1.2% annually and improved from Q3’s upwardly revised 0.6% year-on-year increase. Meanwhile, the Swedish economy returned to growth overall in 2024, posting a 0.6% expansion; the reading aligned with our Consensus but remained below the past-decade average of 2.0%.
Weak external demand drags on growth: While details of the release are still pending, the external sector appeared to have driven the quarterly slowdown. Monthly data revealed that goods exports fell from Q3’s average in October–November, hinting at persistent headwinds to external demand. More positively, private consumption remained supportive in the same two-month period. Healthy real wage growth likely boosted household finances, as did further rate cuts by the Riksbank at the tail end of 2024; the country has a large share of variable mortgages.
A more comprehensive breakdown of national accounts data for Q4 will be released on 28 February.
Broad-based recovery ahead: Our Consensus is for the economy to gain traction in Q1 and maintain a healthy head of steam throughout 2025. Sturdy real wage growth plus expansionary fiscal and monetary policy should buttress domestic demand, while stronger EU demand should fuel a faster rise in exports. As a result, our panel expects economic growth to rise to a four-year high this year. Still, the outlook hinges on the health of the German manufacturing sector plus the timing and extent of U.S. tariff hikes under President Trump.
Panelist insight: Swedbank analysts commented:
“The economy has bottomed out, but the recovery will not gain speed until the second half of the year. There are several reasons to be optimistic about the Swedish economy in the coming years. First, Sweden has an interest rate-sensitive economy, especially the household sector, which means that the past year’s interest rate cuts should provide a boost to growth going forward. Second, public investment is expected to grow rapidly during our forecast period. […] In addition, business investment as a share of GDP has risen to its highest level in decades, indicating that corporates are in a good position to increase output once demand picks up.”