Economy outperforms preliminary estimates in Q2

Full steam ahead in Q2: A second national accounts release revealed that the economy performed better than initially estimated in the second quarter: GDP bounced back by 1.1% on a seasonally adjusted quarter-on-quarter basis, above the preliminary estimate of a 0.6% rise as well as the upwardly revised 0.8% contraction recorded in the first quarter. On an annual basis, economic growth gained traction, accelerating to 3.4% in Q2, compared to the previous quarter's upwardly revised 2.1% growth and the 2.5% increase initially reported for the quarter.

Exports and pharma industry drive growth: The quarterly turnaround was due to the pharmaceutical industry, stock building and the external sector. In particular, exports of goods and services increased 3.9% on a seasonally adjusted quarterly basis in the second quarter, which was above the first quarter's 4.1% contraction. Meanwhile, imports of goods and services bounced back, growing 1.4% in Q2 (Q1: -0.5% s.a. qoq). Dynamics on the domestic front were less upbeat: Fixed investment growth moderated to 1.2% in Q2, following 1.9% recorded in the previous quarter. Meanwhile, household spending fell 0.3% in Q2, which was a deterioration from the first quarter's 0.2% contraction, and public spending swung to a 0.2% contraction in Q2 (Q1: +1.6% s.a. qoq).

Private spending to power GDP growth ahead: Our Consensus is for sequential GDP growth to rise above the average for H1 in H2. A continued recovery in purchasing power—wages have increased more than prices since Q2 2023—should finally push private consumption to improve. Interest rate cuts and a continued recovery in home prices should support household finances further, aiding private spending in turn. The impact of these positive developments will be more acutely felt in 2025, when private consumption will expand more robustly, as will overall GDP. That said, the performance of the Danish economy remains disproportionately exposed to swings in the strength of the pharma industry.

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