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Swedish economic growth likely to have accelerated sequentially in Q4 2018

Swedish economic growth is likely to have come in line with the Riksbank’s forecast for the fourth quarter. Even if there was some rebound in the fourth quarter, the domestic demand is expected to be sluggish in 2019, noted Nordea Bank in a research report.

“We see Q4 GDP up by 0.6 percent q/q after the drop by 0.2 percent q/q in Q3. The year-on-year figure is largely unchanged at 1.7 percent y/y according to our forecast, well in line with the Riksbank’s view”, said Nordea Bank.

The upturn in the fourth quarter was widespread. Household consumption rose after falling 1 percent in the prior quarter. Exports rebounded, although possibly temporarily. A sharp rise in hours worked showed that public consumption rose. Also inventories are expected to have contributed positively to growth. Companies are not worried, suggesting that the rise in inventories is not a big problem.

However, fixed investment fell in the fourth quarter. Nevertheless, housing starts were surprisingly resilient in the fourth quarter, but it signifies that housing and therefore total investments fell.

Growth in domestic demand is slow in spite of the uptick in the fourth quarter, and the rise does not change the view of the sluggish economic growth in 2019. Not least is the trend for household consumption weak and fixed investment is likely to continue to fall. This would be a worry for the Riksbank as boosting the domestic economy is a focal point for monetary policy, stated Nordea Bank.

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