Sweden’s Economic Surprise Is Tinged by Domestic Weakness
Sweden's Economy Shows Surprising Strength as Exports Climb
(Bloomberg) --
Sweden’s economy expanded three times faster than estimated at the start of the year, helped by a rise in exports even as households cut back on spending and investments declined.
Gross domestic product grew 0.6% in the first quarter and 2.1% from a year earlier, Statistics Sweden said on Wednesday. Economists had predicted an expansion of 0.2% and 1.7%, respectively. The Riksbank expected annual growth of 1.7%.
The $500 billion economy was rescued by exports, which held up even amid growing global trade tensions while imports slumped. Most other key components dropped, including consumer spending and investments. But the resilience may give some backing to the central bank’s plans to raise interest rates again toward the end of the year or early next year.
“It should be a number that will be welcomed a bit by the Riksbank,” said Andreas Wallstrom, an economist at Swedbank. “There’s not really any recession anywhere near, and the labor market should continue to hold up well. That speaks in favor of that the Riksbank can come back later this year and raise the rate.”
Others provided a more negative note. Johan Lof, a senior economist at Handelsbanken, said the data suggests that a slowdown may be gaining pace with many components weakening.
“This should send some worrying signals” to the Riksbank, he said. “Without the strong economic development they are counting on, combined with rising unemployment and inflation that struggles to stick to 2%, the Riksbank will need to cancel its rate hikes.”
A drop in house prices since 2017 has weighed on both the key component of housing investments and consumers. Coupled with rising global uncertainty, Swedish consumer confidence fell to a six-year low in May amid increased pessimism about both their own economic situation and the state of the country.
The krona initially rose on the news, but was little changed at 10.716 per euro as of 10:23 a.m.
To contact the reporters on this story: Amanda Billner in Stockholm at abillner@bloomberg.net;Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net
To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Stephen Treloar
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