Swedish GDP was much stronger than expected in the beginning of the year. GDP rose by a full 0.6% q/q. We had expected GDP to contract by 0.2% while the consensus’ as well as the Riksbank’s forecasts stood at +0.3%. However, the figures are weaker than they look at first glance. The main surprise is inventories, which lifted GDP by a full 0.7% point y/y while we had expected inventories to remain growth neutral. This should weigh on growth in the coming quarters. Also, investments dropped sharply and were down by 7.2% y/y, mainly due to a broad based downturn by 8.5% in the business sector. Thus, important parts of the domestic economy are currently performing poorly. Investments were weaker than we had expected.
On the positive side, household consumption was strong and a bit better than forecast. Consumption rose by a full 1.0% q/q and by 1.5% y/y, reflecting good fundamentals for households. Good growth in the household sector is important for the Riksbank. Exports came out largely as expected, thus weak. Total exports were down by 1.4% q/q and by 2.9% y/y, in line with our call. Imports were much lower than expected and fell markedly both on the quarter and over the year, explaining some of the better than expected GDP reading. Notably, there were big discrepancies in the national accounts. The expenditure side showed a growth by 1.7% y/y while the production side showed a decline by 0.3% y/y, underlining the uncertainty in the numbers. All in all, the global slowdown is hitting the export industry with full force. Households are well off while investments and inventories are sources of concern. Although there are several bad news in today’s figures, the strong GDP growth in the beginning of the year reduces the probability of Riksbank cutting rates further. We therefore stick to our view of the Riksbank staying on hold.
Details, Q1 GDP components:
GDP: 0.6% q/q (Nordea -0.2; consensus 0.3; Riksbank 0.3; prior 0.1 revised from 0.0)
GDP: 1.7% y/y (Nordea 1.0; consensus 1.4; Riksbank 1.4; prior unrevised at 1.4)
Household consumption: 1.5% y/y (Nordea 1.2; prior 1.6 revised from 1.9)
Gov. consumption: -0.1% y/y (Nordea 0.1; prior 1.0 revised from 1.1)
Fixed investments: -7.2% y/y (Nordea -4.2; prior 1.8)
Inventories, growth contribution: 0.7%-point (Nordea -0.1; prior -1.6 revised from -1.5)
Exports: -2.9% y/y (Nordea -2.4; prior 0.5 revised from 0.0)
Imports: -4.7% y/y (Nordea -3.7; prior -0.9 revised from -1.1)
Nordea