Swedish economy likely to have expanded strongly in Q3

In the third quarter, Swedish economy continued to perform well and has probably surpassed the central bank’s forecast. According to a Nordea Bank research report, the Swedish economy is expected to have expanded 1.3 percent sequentially and 4 percent year-on-year. This is about 0.5 percentage points above Riksbank’s forecast.

The solid growth will be welcome news for the Riksbank. The central bank wises to see good growth to stimulate inflation. But the third quarter is history and more important is how the housing market would develop and how it will impact domestic demand, stated Nordea Bank. The growth prospects have become uncertain, which impacts longer term inflation. This implies that a first move from the central bank might be even more distant than the projection of a rate hike in the fourth quarter of 2018.

Exports of goods appeared to have stagnated from the previous quarter. Meanwhile, exports of services should have gained traction after the past year’s sluggishness. Household consumption continues to be on a stable upward trend, and an upsurge in hours worked implies that government consumption has risen. Housing construction is expected to have risen, while total fixed investment probably showed good growth.

Business sector’s production data at 4.5 percent year-on-year indicates to even stronger GDP growth in the third quarter. But the production figures have been on the solid side for some time. The sharp rise in hours worked signifies that productivity growth was subdued on a quarterly basis.

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