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Fast Comment DenmarkNo crisis in the Danish economy

  1. Preliminary GDP indicator showed growth of 0.9 percent q-o-q in Q4 last year
  2. Thus, the economy ended the year on solid footing and grew 2 percent in 2017
  3. This confirms our view that the negative growth in Q3 was a temporary glitch
Strong finish to the year
The Danish economy ended 2017 on solid footing, as the preliminary GDP indicator showed growth of 0.9 percent q-o-q in Q4 last year. This washes away the scare following the negative growth observed in Q3. However, we were already convinced that the disappointing contraction in Q3 was a temporary glitch in an otherwise positive growth story, and we had expected a relatively strong rebound in Q4, albeit not quite as strong as the preliminary GDP figure indicates. We do not yet know the details behind the positive growth, but the industrial sector in particular appears to have staged a solid comeback. In our view, private consumption probably also contributed positively to growth following a disappointing negative performance in both Q2 and Q3, and net foreign trade (especially within services) appears to have lifted overall growth too.
Growth matched 2016
Since its introduction in Q3 2016, we note that the GDP indicator has not been very accurate with regard to the final outcome of growth. While it has always been right in predicting the direction of the economy, the final result might deviate by up to 50% based on our (albeit limited) historical evidence. However, this does not alter our view that the Danish economy made a solid return to the growth track in Q4 and we estimate that total GDP growth for 2017 landed at 2 percent, in line with growth in 2016 and slightly higher than our latest estimate of 1.9 percent. We consider this an acceptable result, which is probably also higher than the current production potential for the economy. This means that growth continues to reduce the amount available resources in the economy. There are still no signs of any significant overheating of the economy, but if growth continues at this clip, it is important to keep a keen eye on signs of increasing pressure in the labour market. Nevertheless, we continue to expect that the economy will lose some steam as we move closer to 2019 and beyond, led by a deceleration in global economic activity and somewhat tighter financial conditions.

Disclaimer

Jes Asmussen

Chief Economist Denmark

Denmark and The Netherlands

jeas01@handelsbanken.dk

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