Swedish economic growth likely to have stayed flat at 0.5 pct sequentially in Q3, says Nordea Bank

Swedish economy stated off the third quarter with weak export and production readings; however, the hard data slowly improved and trends have been quite decent. The overall scenario is one of the increasing private consumption; although at a moderate rate. Goods exports reached a weak spot in 2016; however, it did not worsen further in the summer.

Residential construction was the most solid expanding GDP component in the third quarter. The preliminary statistics showed that the number of housing starts has not been higher during a single quarter since at least 1975, noted Nordea Bank in a research report.

Other investment activity appears to have remained quite subdued in the third quarter, particularly for the manufacturing industry. Public consumption remains at a high level due to the huge refuge influx in 2015. Stockbuilding is unlikely to have made any major effect on the economic growth in the third quarter; however, it is expected to depress growth in quarters ahead, stated Nordea Bank.

“All in all, we estimate that Q3GDP rose by 0.5 percent q/q and 3.1 percent y/y”, added Nordea Bank.

The number of hours worked trend was subdued. It rose just 1.1 percent year-on-year and dropped in comparison to the second quarter, according to Nordea Bank’s calculations. This implies that productivity was up and cost pressures are expected to have eased. But, productivity and all derived measures are quite volatile. Therefore, unit labor cost for individual quarters are expected to be interpreted with caution, said Nordea Bank.

The fourth quarter outlook seems to have improved. But the Riksbank is expected to implement additional stimulus measures in December. The central bank wants a weak SEK, but it also needs a strong Swedish economy to boost inflation, according to Nordea Bank.