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Fast Comment DenmarkA bit more speed in the economy than expected

  1. Preliminary GDP showed growth of 0.4% q-o-q in Q1 - a bit stronger than expected
  2. Car sales secured solid private consumption growth - but exports and investments disappointed
  3. We maintain our outlook of moderate growth but also that annual growth has peaked
Not so bad after all
While we are not exactly cheering, we find some reason for moderate celebration in the wake of the release of the preliminary GDP figures for Q1. The economy expanded 0.4 percent q-o-q in the first three months of the year, which was above the reading from the GDP indicator (0.3 percent) and our estimate of 0.2 percent q-o-q. Growth was however moderate and thus the picture is still that the Danish economy followed in the wake of the slowdown tendency seen especially in the eurozone. On a bright note, inventories subtracted 0.3 percentage points from growth, leaving a somewhat stronger picture of underlying growth. The annual growth rate was a meagre -0.5 percent, but this is primarily due to the large one-off payment from abroad in Q1 last year. Corrected for this, annual growth was still a modest 1.3 percent. As such, we maintain our forecast for continued moderate growth this year, with uncertainty having increased lately due to the current problems in Italy. We also maintain our outlook that annual growth in the Danish economy has passed its peak this time around.
Exports and investments disappointed
One of the more dismal news in today's report was the negative development in exports, which contracted 0.5 percent q-o-q. This was due to a drop in exports of services, and should probably be seen in light of the tendency for a slowdown in the global economy in Q1. As imports rose in the same period, net trade subtracted from overall economic growth. Also somewhat disappointing was the drop in business investments, which came at the wrong time. The Danish economy is in dire need of investments to enhance productivity in order to continue growing without risking bottlenecks and lack of labour hampering growth potential. Housing investments, on the other hand, rose solidly in Q1, indicating a continued increase in the supply of housing, which could act to dampen price developments especially in the larger cities.
Private consumption was a bright spot
A bright spot came from private consumption, with a stronger-than-expected increase of 0.9 percent q-o-q. Car sales were a big contributor this quarter as well. Cautious consumers have been a reason for the somewhat moderate growth we have seen in the last year or so. This is positive as households are strengthening their balances, but in order to shift growth into a higher gear, it is important that private consumption maintains stronger momentum for the remainder of the year.


Jes Asmussen

Chief Economist Denmark

Denmark and The Netherlands

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