Sweden: Economy disappoints but exits technical recession in Q4
The Swedish economy exited a technical recession by a whisker in the final quarter of 2023, with GDP expanding 0.1% in seasonally adjusted quarter-on-quarter terms, according to preliminary figures released by Statistics Sweden. This was an improvement from the 0.1% quarterly contraction tallied in Q3, but fell short of market expectations.
Meanwhile, in annual terms, GDP also returned to growth and tallied a 0.1% increase, following a 1.3% year-on-year decline in the prior three months.
While details of the release are still pending, the quarterly upturn was likely due to a low base of comparison: The economy remained in a tough spot and heavily constrained by elevated interest rates. The quarterly upturn chiefly reflected a 0.3% month-on-month GDP expansion tallied in October, as the economy contracted in both November and December in monthly terms. Moreover, private consumption grew month on month in both October and December, although it posted a non-negligible decline in November. Lower average inflation in Q4, coupled with continued year-on-year nominal wage growth in October–November, likely lent support to disposable incomes: Monthly retail sales expanded 0.6% on average in Q4.
Our Consensus is for GDP to expand at a similar pace in Q1 2024 to Q4 in seasonally adjusted quarter-on-quarter terms. Sequential growth should then gain steam through Q4 2024 as the recovery takes hold; in particular, the Riksbank should provide the economy with long-awaited relief by cutting interest rates later this year.
A more comprehensive breakdown of national accounts data for Q4 will be released on 29 February.