Finland: GDP growth records quickest expansion in two years in Q2
A revised national accounts release revealed that economic growth in Q2 remained stable at Q1’s upwardly revised 0.3% on a seasonally adjusted quarter-on-quarter basis. Q2 marked the joint-highest reading in two years and was largely in line with market expectations and the Euro area average. That said, the result fell short of a preliminary estimate of 0.4% sequential growth. On an annual basis, economic activity declined 1.2% in Q2, compared to the previous quarter’s 1.3% contraction and marking the smallest drop in a year.
Domestically, the quarterly print was underpinned by a faster increase in public spending, which rose 1.2% in seasonally adjusted quarterly terms in Q2 (Q1: +0.4 s.a. qoq). Moreover, fixed investment slid at a slower rate of 2.1% in Q2, following the 4.0% contraction in the previous quarter. Less positively, private consumption deteriorated, contracting 1.1% seasonally adjusted quarter on quarter in Q2 compared to a 0.8% contraction in Q1. A higher unemployment rate in the quarter likely weighed on household purchasing power.
On the external front, exports of goods and services bounced back, growing 8.1% seasonally adjusted quarter on quarter in the second quarter (Q1: -5.0% s.a. qoq), which marked the best reading since Q4 2020. However, imports of goods and services also rebounded, growing 1.1% in Q2 (Q1: -1.6% s.a. qoq). As a result, net trade contributed positively to the overall improvement.
Our panelists expect sequential growth to accelerate slightly in the second half of the year from the first, aided by recovering private spending amid a declining unemployment rate and subdued inflation. That said, our Consensus is for the economy to remain in the doldrums in 2024 as a whole, hit by elevated interest rates, fiscal consolidation efforts and weak performances in key trade partners Germany and Sweden.
SEB’s Mihkel Nestor commented:
“Finding a bright spot in the Finnish economy is difficult. Low foreign demand is hampering exports, high interest rates are curbing construction and low sentiment is dampening consumer demand. This is all holding back the economy. We expect GDP to decline by 0.6 per cent this year.”