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Fast Comment DenmarkSolid growth in Q4, but overall picture still murky

  1. Despite a small downward revision, GDP growth ended 2017 on a strong note
  2. One-off payment from abroad still clouds the picture
  3. Labour market in good health with new drop in unemployment in February
GDP growth slightly lower in Q4, but still solid
The revised GDP figures for Q4 last year are still an encouraging read. 2017 ended with GDP growth of 0.9 percent q-o-q, and even though it is a small downward revision compared to the preliminary figures (1.0 percent q-o-q), it is still an approved result. The improvement in the economy in Q4 was still primarily driven by private consumption, but exports and fixed business investments also improved in the final months of 2017. However, residential investment growth was revised down significantly. Large inventory fluctuations also affect the picture; inventories added 0.8 percentage points to growth in Q4 after having subtracted 0.8 percentage points in the previous quarter. Overall, growth landed at 2.2 percent for 2017 as a whole, a small upward revision from 2.1 percent.
Still a messy picture
Despite the positive ending, the progression in 2017 must still be characterised as a messy picture with large fluctuations in private consumption, exports and inventories throughout the year. The large one-off payment for the use of a Danish-owned patent, which is classified as a service export and was booked in Q1 last year, is also clouding the picture. If one excludes this payment, GDP growth in 2017 was only 1.8 percent, which is a bit on the disappointing side. Furthermore, exports were 0.4 percent lower in Q4 compared to the same period the year before, and private consumption only grew 1.5 percent in 2017 as a whole; this is not a picture of strong advances in several of the most important demand components. Moreover, the average quarterly growth in H2 2017 was only 0.0 percent, which makes it harder to conclude that the economy is firing on all cylinders. On a positive note, fixed business investments were revised significantly higher in Q4, which adds to hopes of a more virtuous investment cycle.
Hard to draw conclusions
In sum, we still find it difficult to make any steadfast conclusions about the strength of the Danish economy based on the messy GDP figures. In general, we believe that the economy is in satisfactory health and that growth has continued into 2018. This is evident in the continued strength in the labour market: employment rose by 12,700 persons in Q4 and new figures from today showed that gross unemployment fell for the sixth consecutive month, this time by 700 persons in February. However, growth in 2018 will be negatively affected by the large one-off payment last year, if it is not revised to cover a different and longer time period, which we view as likely. Furthermore, there is some uncertainty surrounding the global economy, which is showing tentative signs of losing some momentum, and financial market jitters and the risk of an escalating trade war between China and the US could dampen the growth outlook.


Jes Asmussen

Chief Economist Denmark

Denmark and The Netherlands

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