GDP growth wanes in Q2

GDP reading: A revised national accounts release revealed that economic growth in Q2 decelerated to 0.1% from Q1’s upwardly revised 0.3% on a seasonally adjusted quarter-on-quarter basis. The result fell short of a preliminary estimate of 0.4% sequential growth. On an annual basis, economic activity declined 1.1% in Q2, compared to the previous quarter's 1.5% contraction.

Drivers: Domestically, the quarterly print was due to private consumption deteriorating and contracting 1.0% seasonally adjusted quarter on quarter in Q2 compared to a 0.7% increase in Q1. A higher unemployment rate in the quarter likely weighed on household purchasing power. More positively, public spending growth accelerated to 1.3% in seasonally adjusted quarterly terms in Q2 (Q1: +0.8% s.a. qoq). Moreover, fixed investment slid at a slower rate of 2.1% in Q2, following the 3.8% contraction in the previous quarter. On the external front, exports of goods and services bounced back, growing 8.4% seasonally adjusted quarter on quarter in the second quarter (Q1: -4.7% s.a. qoq). However, imports of goods and services also rebounded, growing 12.1% in Q2 (Q1: -1.8% s.a. qoq). As a result, net trade contributed positively to the overall improvement.

GDP outlook: Our panelists expect sequential growth to accelerate slightly in the second half of the year from the first, aided by recovering private spending amid a declining unemployment rate and subdued inflation. That said, our Consensus is for the economy to remain in the doldrums in 2024 as a whole, hit by elevated interest rates, fiscal consolidation efforts and weak performances in key trade partners Germany and Sweden.

Panelist insight: SEB’s Mihkel Nestor commented: “Finding a bright spot in the Finnish economy is difficult. Low foreign demand is hampering exports, high interest rates are curbing construction and low sentiment is dampening consumer demand. This is all holding back the economy. We expect GDP to decline by 0.6 per cent this year.”

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