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Fast Comment SwedenWeek ahead: GDP recoils after the growth spurt toward the end of last year

  1. GDP growth cooling, but Q1 in isolation expected to be an overstatement of this trend
  2. For the near-term GDP outlook, housing investment is key - more hard data tomorrow!
  3. In other news, retail sales and economic sentiment indicators are also easing, we expect
GDP growth cooling, but Q1 in isolation expected to be an overstatement of this trend
We expect the first quarter national accounts to show that GDP growth recoiled significantly, registering a meagre +0.1 percent compared to Q4 2018. But remember that Q4 was a surprisingly strong quarter. Overall, we would argue that growth is in a gradual negative trend, and underscore that quarterly growth data are volatile readings around that trend. In a broader sense consumption is holding up well, while exports have also been good. However, new export orders have been deteriorating rapidly lately and business sector production growth has slowed, strengthening our forecast for a gradual cooling of GDP growth in 2019.
For near-term GDP outlook, housing investment is key - more news tomorrow!
Tomorrow, Friday, May 24, first quarter construction data will be released, adding the next piece of the housing construction puzzle. Q1 reports from listed companies have already indicated that housing starts fell further during the start of the year and our GDP forecast implies that tomorrow's economy-wide data confirm that tendency. However, the construction data outcome has the potential to alter our GDP estimate ahead of next week. Stay tuned! Another important detail of next week's GDP will be the expected rebound in R&D investments. Admittedly, it is neutral to the overall growth print since the positive post is offset by an equally negative post in exports. But these messy details risk blurring the view of underlying economic developments, so caution is warranted.
In other news, retail sales and economic sentiment indicators are also easing, we expect
Next week also sees April retail sales. We have pencilled in a decrease of 0.1 percent m-o-m, sending the annual rate much lower, to only +0.2 percent y-o-y. The outcome can go either way though, not least because of the Easter effect. It has been reported that clothing and shoes sales plummeted as they often do during this holiday, but sometimes food sales growth compensates for that shortfall in the overall data. We will know on Tuesday. On the same day, we expect the business and consumer surveys of the National Institute of Economic Research will signal further dampening of economic sentiment, driven by the export-oriented manufacturing sector.

We forecast a gradual cooling of GDP growth, but Q1 will likely overstate the deceleration compared to the underlying trend

Zooming in on just the first quarter data, quarterly growth is stagnant at +0.1 percent... 

...but the bigger picture is that growth is still holding up OK, at an annual rate of +1.6 percent 

Business sector production data provide some hard evidence that GDP growth indeed continues to dampen  

R&D transactions dragged down investment in Q4 2018, but it is expected to bounce back. For now  building investment will likely hamper GDP growth as housing construction wanes

Q1 national accounts also show if unit labour costs (ULC) will pick up as resource utilisation (RU) suggests it should. And next week also sees the March hourly wage reading... 

We expect the retail sales trend to have dampened slightly in April. Durables sales are said to have been slow and the latest retail confidence data showed a drop  

Source: Macrobond

Economic sentiment is expected to have cooled somewhat, approaching the average level overall 


Johan Löf

Senior Economist


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Fast Comment Sweden


Fast Comment Sweden


Fast Comment Sweden