Finland: Economic growth drops sharply in the third quarter
December 9, 2010
In the third quarter, gross domestic product (GDP) increased 0.5% over the previous quarter in seasonally adjusted terms. The rise represented a significant deceleration compared to the second quarter's extraordinary 2.6% increase (previously reported: +1.9% quarter-on-quarter), which marked the fastest pace in over 20 years. Furthermore, the figure came in well below the Statistics Finland preliminary estimate of a 1.3% expansion. In annual terms, GDP grew 3.7% in the third quarter, down from the 4.9% expansion observed in the second quarter. The slowdown was mainly fuelled by a sharp deceleration in exports, which swung from a 13.5% expansion in the second quarter to a 0.1% contraction in the third quarter. Meanwhile, imports slowed less markedly, moderating form a 7.5% expansion in the second quarter to a 5.5% increase. As a result, the net contribution from the external sector to overall growth swung from a positive 3.5 percentage-point contribution in the second quarter to a 2.3 percentage-point detraction in the third quarter. On the domestic side, total consumption accelerated from a 0.2% increase in the second quarter to 0.7% in the third quarter, fueled by higher government consumption (Q2: -1.4% qoq; Q3: +0.3% qoq), while private consumption growth was unchanged on the second quarter's 0.9%. In contrast, gross fixed investment decelerated to a 2.7% expansion (Q2: +3.9% qoq), mostly driven by softer growth in residential building investment. At the sector level, the deceleration was broad-based, with growth in all three main sectors ? agriculture, industry and services ? slowing over the previous quarter. In particular, agriculture, forestry and fishing, dropped 5.3% (Q2: +4.2% qoq). Meanwhile, industry and construction, posted a 0.3% contraction (Q2: +4.3% qoq), while services, which represent nearly half of the total economy, recorded a flat reading (Q2: +0.8% qoq). The Bank of Finland anticipates that the economy will grow 2.6% this year and 3.0% next year.