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Fast Comment DenmarkSurprisingly strong GDP-growth in Q3

  1. The GDP indicator showed growth of 0.7 percent q-o-q in Q3 - much stronger than we had expected
  2. Growth was more than twice as strong as in the eurozone
  3. The GDP indicator is however surrounded by uncertainty
Solid rebound in the economy
Following muted growth in the first half of the year, the preliminary GDP-indicator points at a solid comeback for the economy in Q3. According to this indicator GDP Growth accelerated to 0.7 percent q-o-q in Q3 which was much stronger than our expectation of 0.2% quarterly growth. This is more than twice the growth rate in the eurozone in the same period. According to Statistics Denmark (DST) growth was broad based within production growing in most sectors however construction contributed especially strongly. Production within agriculture and energy did however contract as expected. Note that the preliminary GDP-indicator is solely based on early indicators on the production side whereas demand components like foreign trade, Investments and consumption is not included.
Large uncertainties
Even though today's figure shows a solid improvement in the economy we are still cautious in putting too much weight on the GDP-indicator. The uncertainties surrounding the GDP-indicator is usually high but this time around it is even higher than usual as DST has yet to incorporate the recent large revisions to annual GDP growth into the quarterly national accounts, which will not happen until 30 November. But overall the national accounts as a measurement of the strength of the economy has lost a lot of credibility due to these extremely large upward revisions back in time which has considerably altered the perception of the economic recovery. If we were to present a guess it is still that growth was more muted in Q3 than signaled by the GDP-indicator. If this is not the case we will probably have to revise our forecast for growth this year a bit higher and perhaps be a little more concerned regarding the risk of overheating.

Disclaimer

Jes Asmussen

Chief Economist Denmark

Denmark

jeas01@handelsbanken.dk

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