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Fast Comment DenmarkThe Danish economy was a European powerhouse in Q3

  1. GDP growth was a solid 0.7 percent q-o-q in Q3
  2. Thus, the Danish economy outpaced growth of several main trading partners
  3. We still see growth as having peaked
Solid growth in Q3
The Danish economy emerged as a powerhouse in the European growth picture in Q3, as GDP growth was a solid 0.7 percent q-o-q according to the preliminary national account figures. This stands out compared to growth in several of Denmark's closest neighbours, with both Germany and Sweden experiencing outright economic contraction in Q3, while growth in the eurozone as a whole was a much more subdued 0.3 percent q-o-q in the same period. The strong outcome paints a decent picture of the strength in the Danish economy following a more subdued development in the first half of 2018, with net exports returning as an engine of growth. Despite the solid development in Q3, we still believe the peak in growth is behind us. For 2018 as a whole, overall GDP growth will still come out as weak and will hardly exceed 1%, but that is primarily due to a series of temporary factors. Even correcting for these, the economy will most likely still have expanded at a slower pace than in 2017 and we expect growth to gradually slow in 2019, as the global economy cools down further. Currently, we still see risks to the economy as being mainly tilted to the downside, while capacity constraints are also seen as a challenge in the shorter run. Gross unemployment did stay largely unchanged in October where we had expected a larger decline, but employment increased by 9,000 persons in Q3 according to the national accounts.
Exports are growing again; residential investments decline
The muted growth in the first half of 2018 was mainly attributed to a very dismal development in exports and, as such, it was a pleasant surprise that this component performed more favourably in Q3, with an increase of 1.6 percent q-o-q. The contribution from net exports to overall growth was further enhanced by a marked drop in imports, which to a large degree was due to a drop in imports of ships after these had surged in the first half of the year. The effect on overall GDP from this is, however, benign as it is counteracted by business investments, which dropped significantly in Q3. Even when taking out these ship investments, imports only increased by 0.2 percent q-o-q, which then still adds up to net exports acting as the primary growth engine in Q3. On the more negative side, fixed business investments excluding ships were more or less flat in Q3. Furthermore, we also saw the first evidence of the expected slowdown in the housing market, as residential investments fell 1.0 percent q-o-q after having provided a strong fundament for growth in recent years. Private consumption growth was also relatively muted, with car sales in particular acting as a drag. On the positive side, inventories did not grow as we had expected, but we do expect that this picture will change in Q4 as demand wanes.


Jes Asmussen

Chief Economist Denmark


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