GDP rebounds in Q2

Q2 sees GDP returning to growth in sequential terms: GDP rebounded in the second quarter, expanding 1.3% on a seasonally adjusted quarter-on-quarter basis, contrasting the 1.3% contraction seen in the first quarter and marking the best result in a year. On an annual basis, economic growth lost steam, cooling to a seasonally adjusted 1.9% in Q2, from the previous quarter's 2.5% increase and marking the worst reading since Q1 2024.

Public spending, fixed investment and exports drive recovery: The sequential rebound can be attributed to improvements in government spending, fixed investment and exports of goods and services. Domestically, public consumption rebounded, growing 0.8% in Q2 (Q1: -1.6% s.a. qoq), while fixed investment declined at a softer pace of 0.3% in Q2, improving from the 13.5% plunge in the previous quarter. Conversely, household spending growth waned to 0.5% in seasonally adjusted quarter-on-quarter terms in Q2 compared to the upwardly revised 0.8% expansion in Q1. On the external front, exports of goods and services increased 4.0% on a seasonally adjusted quarterly basis in Q2, which contrasted Q1's 4.0% contraction. Meanwhile, imports of goods and services bounced back, growing 2.0% in Q2 (Q1: -5.9% s.a. qoq). Sectoral data shows the pharma industry drove Q2’s improvement; when the pharma industry was excluded, GDP roughly stagnated in Q2. Moreover, positive growth was also recorded in the public production and raw material extraction amid higher oil output.

Domestic demand to cushion slowdown: Our panelists see sequential growth cooling from current levels in the coming quarters. While annual GDP growth is seen slowing from 2024’s pace this year, it is set to exceed that of its Nordic peers for a second year running, supported by relatively low inflation and resilient domestic demand. Volatility in the pharmaceutical sector, stemming from tariff and trade uncertainty, together with leading Danish pharma company Novo Nordisk’s fading first-mover advantage, will weigh on the industrial and goods export growth, capping economic momentum.

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