Sweden Domestic Demand (ann. var. %)

Domestic Demand in Sweden

Economic growth surprises markets on the upside in Q1

The Swedish economy avoided a technical recession at the outset of 2023. GDP returned to growth and expanded a timid 0.2% in seasonally adjusted quarter-on-quarter terms in Q1 2023, according to preliminary figures released by Statistics Sweden. The expansion was an improvement from the 0.4% sequential contraction recorded in the previous quarter and surprised markets on the upside; GDP was expected to flatline in Q1.

Meanwhile, in calendar-adjusted annual terms, GDP also rose and tallied a 0.4% increase in the first quarter, swinging from the marginal 0.1% decline posted in the prior three-month period.

Although details of the release are still pending, the quarterly expansion was largely due to the economy’s strong performance in January, which more than offset February and March’s GDP declines. The Riksbank’s further tightening in February, on top of the previous hikes, has succeeded in denting activity, although not so much in tempering price pressures—which remained stubbornly elevated in Q1. Accordingly, private consumption contracted in February, as households’ purchasing power continued to come under pressure. Despite Q1’s upturn, the Swedish economy is still expected to contract in 2023, which means the downturn should come later in the year.

A more comprehensive breakdown of Q1 2023 GDP will be released on 30 May.