No growth recorded in Sweden’s economy

No growth recorded in Sweden's economy
Sweden’s gross national domestic product (GDP) remained unchanged during the second quarter this year, compared with the first quarter, marking the worst growth level since 2003.

Analysts had expected a second quarter growth rate of 0.3 percent.

However, when compared with the same period last year, GDP grew by 0.7 percent, according to figures from Statistics Sweden.

According to a survey by Reuters, economists had expected an annualized growth rate of 2.0 percent, more than twice as high as the 0.7 percent recorded.

Household consumption expenditures rose by 2.2 percent, as consumers continued to purchase home electronics and clothing.

At the same time, gross fixed capital formation rose 3.9 percent, which is the lowest rate of increase since the beginning of 2004.

Business sector investment was up 2.9 percent, which is in line with figures from recent years.

When it comes to international trade, Sweden’s exports rose 6.7 percent, while imports were up 9.0 percent. Exports in the service sector showed their weakest growth since the fourth quarter of 2006. Similarly, goods contributed most to the increase in imports.

Net exports made a negative contribution to GDP-growth, knocking of 0.4 percent.

“It’s imports and investments which are taking down the numbers. At the same time we have very unfavourable productivity growth. That, together with wage-level increases of 4.4 percent makes for an undesirable cost situation,” said Mats Hydén, an interest rate analyst at Swedbank.

His spontaneous reaction is that short-term interest rates ought to fall, but he admits that it’s hard to project how the GDP figures may affect future rate decisions by the Riksbank.

“This is far below the Riksbank’s own forecast. But they prioritize their inflation target,” said Hydén.