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Fast Comment SwedenGDP growth in the second quarter

  1. Growth surprisingly fast, as household consumption rises
  2. Swedish economy deep into boom phase of the business cycle
  3. Coupled with today's labour cost news, growth reading supports our Riksbank forecast
Growth surprisingly fast, as household consumption rises
The preliminary second quarter National Accounts show accelerating GDP growth compared to the first quarter reading (1.0 percent q-o-q seasonally adjusted (SA), vs. revised first quarter growth of 0.8 percent (0.7)). The outcome was higher than expectations (our estimate 0.5; Riksbank 0.5; consensus median 0.5). We judge this surprise to be partly driven by household consumption, which accelerated. We had noticed the surge in car sales in June, but it appears the impact was stronger than anticipated. Also, goods exports were higher than monthly data had indicated, but that was roughly cancelled out by weak services exports. Compared to the second quarter in 2017, calendar-adjusted GDP growth was 3.3 percent.
Swedish economy deep into boom phase of the business cycle
Zooming out and comparing today's GDP outcome to our April forecast report, we find GDP developments in the first half of 2018 to be more or less as expected. The bottom line is that growth continues to be strong enough to push the Swedish economy further into the cyclical boom. Two reasons to expect more of the same in the third quarter are: 1) overall buoyant sentiment indicators, e.g. the NIER survey, 2) recent weakness in monthly goods export data should abate on the back of the still strong global growth. Remember however that GDP growth will at the same time be dampened by waning housing construction.
Coupled with today's labour cost news, growth reading supports our Riksbank forecast
A mere gradual cooling-off of the business cycle going forward means there is still plenty of room for wages and inflation to rise further. Today's GDP and associated labour cost outcome figures do not oppose that view and we stick to our forecast of a Riksbank rate hike in December.






Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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