Swedish economic growth likely to have grown modestly in Q1 2018 – Nordea Bank

Swedish economic growth data for the first quarter is set to be released next week. According to a Nordea Bank research report, the GDP is expected to have grown by a modest 0.3 percent sequential rate in the March quarter. The central bank anticipates the economy to have grown 0.6 percent. If Nordea Bank’s projection comes true, it would signify bad news for the Riksbank. Firstly, growth would be below expectation and secondly, productivity rose sharply as hours worked fell considerably compared with the fourth quarter, leading to lower cost pressures.

However, the fall in number of hours worked should be seen against the background of last year’s very considerable rise. Furthermore, Easter fell at the turn of March/April, which might have had a negative impact on the number of hours worked but a positive impact on consumption. Therefore, any firm conclusions should away numbers for the first half of the year, stated Nordea Bank.

“Our overall view is that GDP growth will slow this year, undershooting the Riksbank’s forecast and a factor suggesting that the Riksbank will wait longer before hiking rates”, added Nordea Bank.

In the first quarter, household demand and public consumption rose steadily. Household consumption was probably stimulated by spending ahead of the Easter weekend. Furthermore, given the unusually long winter, household spending on energy rose. Therefore, temporary factors stimulated consumption. It still remains to be seen how consumers react to the softening housing market.

Investment in new housing dropped a bit sequentially in the first quarter. A previous growth engine has therefore stalled. So far, the fall in residential construction is not affecting growth to any major extent, but this might likely change later in 2018. Total investment rose in the first quarter, owing to private sector growth and major municipal initiatives.

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