Sweden: Economy disappoints markets again in Q2
The Swedish economy was set back in the second quarter: GDP contracted 0.8% in seasonally adjusted quarter-on-quarter terms, according to preliminary figures from Statistics Sweden. The downturn, which was a deterioration from Q1’s 0.5% sequential increase and the worst result since Q1 2022, notably undershot market expectations. More positively, a revision of prior data showed that the economy did not contract in Q3 2023–Q1 2024 as initially anticipated.
Meanwhile, in annual terms, GDP growth decelerated to just 0.1%, slowing from Q1’s 0.5% year-on-year increase.
While details of the release are still pending, depressed consumer spending was likely behind the quarterly downturn. Private consumption contracted 0.6% month on month both in April and June, and flatlined in May. Despite the Riksbank initiating its loosening cycle in April, interest rates remain notably elevated, hampering household finances and investment; the country has a large share of variable mortgages.
A more comprehensive breakdown of national accounts data for Q2 will be released on 29 August.
Our panelists are optimistic regarding the outlook: GDP should rebound in sequential terms in Q3 and post a similar-sized expansion in Q4. A rebound in private consumption should be the engine of growth: Year-on-year wage growth outpaced inflation in Q4 2023 and Q1 2024, and again in April–May; this trend is expected to continue in the remainder of 2024, spurring a recovery in purchasing power. Moreover, the continued lowering of domestic interest rates will provide additional momentum later on and aid household finances and investment.