Denmark: GDP growth wanes in the third quarter
GDP reading: A revised national accounts release showed that the economy lost steam in Q3, with GDP growth edging down to 0.9% on a seasonally adjusted quarter-on-quarter basis from Q2’s downwardly revised 1.2% increase. The reading fell short of a preliminary estimate of 1.2% growth. On an annual basis, economic activity expanded 3.1% in Q3, deteriorating from an initially reported 3.9% rise and the previous quarter’s 3.7%.
Drivers: Domestically, the quarterly slowdown chiefly reflected decelerating fixed investment, which rose at a softer sequential clip of 1.0% (Q2: +1.9% qoq s.a.) and posted the softest print since Q4 2023. More positively, private consumption recovered marginally, growing 0.1% seasonally adjusted quarter-on-quarter in Q3 from Q2’s 0.2% decline; sturdy real wage growth likely bolstered household purchasing power. In addition, public spending rebounded 0.4% in Q3 (Q2: -0.1% qoq s.a.).
On the external front, exports of goods and services growth slowed to 0.8% (Q2: +3.7% qoq s.a.). Meanwhile, imports of goods and services contracted 0.2% in Q3 (Q2: +1.5% qoq s.a.).
GDP outlook: Our panel expects the economy to have shifted into reverse at the tail end of 2024. However, dynamics on the domestic front should have remained upbeat, with interest rate cuts providing support to private spending and fixed investment. Strong domestic momentum should carry into this year, though a weaker rise in exports will drive economic growth below 2024’s projection in 2025 as a whole. The performance of the external sector and, more broadly, the Danish economy remains disproportionately exposed to fluctuations in the pharmaceutical industry.
Panelist insight: Danske Bank’s Bjorn Tangaa Sillemann commented:
“Our underlying expectations in terms of overall GDP growth are, however, being overshadowed by developments in the pharmaceutical industry. […] Preliminary figures from Statistics Denmark indicate growth ex-pharma for 2024 will be around 1.5%, which is still roughly double the figure for euro area growth, but not abnormally high, and growth seems to be entirely absent from many areas of the economy.”