Sweden: Swedish economy surges in Q2, although a downward revision seems likely
July 30, 2018
According to preliminary figures released by Statistics Sweden on 30 July, the economy expanded a notable 1.0% over the previous quarter in seasonally-adjusted terms, up from Q1’s revised 0.8% figure (previously reported: +0.7% quarter-on-quarter) and double market expectations. Growth clocked 3.3% in working-day adjusted year-on-year terms, matching the prior quarter’s figure. However, the Q2 figures are likely to be revised down in the coming months, as sequential data for the quarter—from the services PMI, the manufacturing PMI and the Economic Tendency Survey—had not pointed to such a strong outturn.
The domestic economy performed well in Q2. Despite weaker consumer sentiment, private consumption growth was a robust 0.9% quarter-on-quarter (Q1: +0.8% qoq), likely supported by a healthy labor market and wage gains. In contrast, fixed investment declined slightly on a tough prior quarter comparative (Q2: -0.2% qoq; Q1: 2.5% qoq). Government spending picked up 0.2% (Q1: 0.0% qoq).
The external sector strengthened in the second quarter. Exports of goods and services were up 0.5% (Q1: -0.2% qoq), likely supported by solid activity in regional trading partners, while imports dipped 0.1% (Q1: +0.6% qoq). As a result, the external sector contributed 0.3 percentage points to growth, following a 0.4 percentage-point subtraction in the first quarter.
Going forward, growth is likely to continue outpacing the EU average, as high capacity utilization and strong sentiment spurs business investment, export growth stays solid and fiscal policy becomes more supportive. On the downside, the weaker housing market will likely dampen residential investment. Downside risks stem from elevated household debt levels—particularly once monetary conditions tighten—and greater global protectionism.
Author: Oliver Reynolds, Economist