German headline inflation rate falls below zero in July, likely to return to positive territory in August
Swedish economic activity drops further in May, rebound likely in June
The GDP-indicator for Sweden declined further in May, implying that activity bottomed out in May, rather than in April. A wide rebound in June is expected as the domestic economy shows signs of resilience, noted Nordea Bank in a research report.
The Swedish economic activity decreased further in May by 1.5 percent sequentially and 9.6 percent year-on-year. This was the fourth consecutive month with declines in economic activity. According to Statistics Sweden, both household-and public consumption as well as net exports added to the decline in May. Today’s release affirms what sales indicator showed on 23 June; that the business sector continued to struggle in May and that activity bottomed out in May rather than in April.
Production in the total business sector dropped further in May. While industrial production was down 15.5 percent on the year, the more domestically oriented services- and construction sectors showed more resilience and dropped 9.4 percent and 2.1 percent respectively. The outcome was better than indicated by SCB’s sales data, and with eased restrictions in many of Sweden’s export markets, increased global demand should contribute to a rebound in June.
Household consumption dropped 9.7 percent year-on-year but rose by 1.2 percent on the month in May, compared to a downward revised drop of 6.6 percent sequential in April. Spending on retail trade in clothing, transport and the hospitality sector are still at very low levels. The NIER’s consumer confidence indicator for May indicated consumers being relatively optimistic about their own financial situation, as well as less negative about making major purchases in the current situation.
Resilience on the housing market has been illustrated by households’ credit growth being stable, and this would be supported by interest rates remaining low. For June, consumer confidence appears to have slightly rebounded again.
“All in all, today’s figures point toward a prolonged, but less steep, decline in Swedish Q2 GDP. Upside risks to our forecast as argued in the beginning of June are reduced but still present”, added Nordea Bank.