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Fast Comment SwedenWeek ahead: negative GDP growth in third quarter? We think not, and near-term outlook is bright

  1. Strong economy, weak quarter
  2. Reasons to stay positive on third quarter growth...
  3. well as the GDP outlook
Strong economy, weak quarter
The Swedish economy is doing extremely well and most leading indicators point to a sustained economic boom, moving into 2019. However, since finalising our November macro forecast report, data releases have made us concerned that we overestimated third quarter GDP (due Thursday). While our report said growth was expected at 0.5 percent q-o-q (seasonally adjusted / 2.6 y-o-y, calendar adjusted), we now see GDP expanding by roughly 0.3 / 2.3 percent. This downgrade follows from depressed inventory data and disappointing business sector production, hurting consecutive growth. Also, a downward revision in the past year's housing construction signals that annual growth may be further below our November forecast report.
Reasons to stay positive on third quarter growth...
The consensus estimate for Q3 GDP has ended up in line with our updated call, but the range is very wide with some analyst's even projecting negative growth. So why do we still believe in a positive outcome? First, while car sales have plunged temporarily, it is likely that other consumption components picked up after a muted second quarter. Second, we forecast a rebound in services exports after a poor showing in the second quarter. Additionally, putting aside the negative tendency in housing investments, we see a bounce back in other fixed investments like machinery, based on indicators such as the very strained capacity utilisation. One uncertainty here is that national accounts economists have likely had early access to the autumn investment survey (due Friday), something that could cause revisions of past GDP outcomes as well. well as the GDP outlook
We expect the business and consumer survey of the National Institute of Economic Research (due Wednesday) to confirm our forecast for sustained economic boom in 2019. The construction sector is cooling off and consumers hesitate in the face of stock market volatility, upcoming interest rate hikes and lingering house price worries. However overall, the NIER survey is expected to remain clearly upbeat, not least helped by manufacturing where order books are still full (indicator estimates: ETI 107 / MCI 114 / CCI 98). Retail sales are back on their feet after the heat wave knock-out this summer, but we forecast growth to be somewhat sluggish (0.3 / 2.0 percent, m-o-m / y-o-y). In a hectic week, don't miss Tuesday's foreign trade data and producer prices, nor Friday's investment survey and wages.

November macro forecast report: Q3 growth likely overestimated; partial rebound in Q4 may compensate somewhat 

Breakdown of November report GDP: inventory impact not negative enough 

Leading indicators and monthly production data suggest near-term GDP growth stays above 2 percent 

Consumer's view on own economy supported by house price stabilisation, but dampened by stock market drop

We expect small decrease in overall CCI, despite a probable rebound in household's macro outlook 

Retail back on its feet after weak summer sales - will bolster consumption ahead, counteracting vehicle sales  


Johan Löf

Senior Economist


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Fast Comment Sweden


Fast Comment Sweden


Fast Comment Sweden