The figures suggest that total inventories will add 0.5% point to GDP growth y/y but probably weigh somewhat on the quarterly growth. Inventories in the manufacturing industry gave a negative contribution to GDP growth y/y (-0.3% point) while it was positive for retailers and wholesalers (+0.7% point).
Overall, companies don’t complain on inventories according to NIER’s Business Tendency Survey. Thus, there seems to be no problems with inventories and developments mainly reflect rising economic activity and to some extent temporary factors (i.e. the petroleum industry).
Despite inventories in line with our expectations, we see some downside risks to our and the Riksbank’s Q1 GDP forecast at +0.2% q/q and 2.5% y/y. It’s a bit tricky with the quarterly profile, but GDP might have declined slightly on the quarter. This implies a year-on-year figure of around 2.0%. Once again it is exports of goods that disappoints, almost stagnating on the quarter as well over the year. Domestic demand, with households as the main driver, continues to show good growth, though.
The sluggish GDP growth in Q1 should be seen on the back of the upsurge by a whopping 1.7% in Q4 last year. Thus, growth trends are decent and there are no reasons to worry. The fact that Easter was in Q2 this year and Q1 last year makes the figures more uncertain.
We haven’t given up our hopes for exports, which according to indicators will start to recover soon. This means that GDP growth will be broad based and pick up as from Q2.
Quarterly GDP figures have been volatile and difficult to predict the past year, but this is how we see the first quarter at this point. There are still more data ahead of Q1 GDP (due 30 May). The May investment survey and housing starts (22 May), revised figures for retail sales (26 May) and trade balance (27 May) are the final pieces in the puzzle.
Nordea