GDP growth ticks down in the third quarter

Economy loses steam but outpaces both market expectations and Euro area average: According to a preliminary estimate, economic growth edged down to 1.2% on a seasonally adjusted quarter-on-quarter basis in Q3 from Q2’s upwardly revised 1.3%. That said, the reading surprised markets on the upside and beat the Euro area average of 0.4%. On an annual basis, economic growth picked up to 3.9% in Q3 from the previous quarter's 3.5% expansion, marking the fastest growth since Q4 2023.

Fixed investment and net trade drag on growth: Domestically, the sequential downtick chiefly reflected a slowdown in fixed investment, which rose 0.9% in Q3 (Q2: +1.8% qoq s.a.) and marked the worst result since Q4 2023. In particular, the reading was dented by softer momentum in investments in housing plus other construction and facilities. More positively, private consumption rebounded 0.3% in Q3 (Q2: -0.3% qoq s.a.), marking the best reading since Q4 2023. Similarly, public spending returned to growth, posting a 0.5% expansion in Q3 (Q2: -0.1% qoq s.a.). On the external front, growth in exports of goods and services slowed to a halt in Q3, deteriorating from the previous quarter’s 4.1% increase. Meanwhile, imports of goods and services fell 0.7% in Q3, compared to Q2’s 1.3% rise. As a result, net trade subtracted from growth in Q3 after having had a positive impact in Q2. From a production point of view, the pharmaceutical industry was once again the chief driver of Q3’s reading. A second national accounts data release for Q3 will be published on 23 December.

Economic growth to remain robust, but pharma industry remains key risk factor: Our panel expects the economy to be shrinking in Q4, but to post a robust expansion in 2024 as a whole compared to 2023. Economic growth is then forecast to lose momentum from 2024’s projection in 2025 and cool gradually further through 2029. That said, the outlook is uncertain due to potential fluctuations in the pharmaceutical industry, on which the Danish economy remains heavily dependent.

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