Sweden: Preliminary data shows economy contracted in Q1 2020
The economy contracted 0.3% in the first quarter of 2020 from the previous quarter in seasonally-adjusted terms, contrasting the 0.2% expansion recorded in Q4 2019, as the effects of the coronavirus pandemic and associated social distancing measures began to be felt. In calendar-adjusted year-on-year terms, the economy expanded 0.5% in Q1 2020 (Q4 2019: +0.8% year-on-year). This is all according to preliminary statistics from Statistics Sweden, which will be revised on 29 May, when a full breakdown of economic activity will also be provided.
A decrease in fixed investment and a drawing down of inventories contributed to the seasonally-adjusted decrease in economic activity in Q1 2020 from the previous quarter, according to the partial breakdown of economic activity currently available. More positively, however, robust exports moderated the overall decrease. Judging from separate consumer confidence and retail sales data, private consumption was likely resilient in Q1, particularly in the first two months of the quarter.
Meanwhile, economic conditions are likely deteriorating rapidly in the second quarter of 2020. The full effects of social distancing measures in Sweden, first introduced in March, will hamper economic activity. Nevertheless, supportive fiscal and accommodative monetary policy will cushion the downturn.