Swedish GDP growing faster than expected

Sweden's second quarter GDP growth was even greater previously reported, according to revised figures from Statistics Sweden (SCB).

Sweden’s economy grew by 4.6 percent in the second quarter compared to the previous year, SCB reported on Wednesday, beating even the most optimistic projections by Sweden’s large banks.

“We thought there would be an upward revision, but not that it would be this much,” Olle Holmgren, an economist with SEB bank, told the TT news agency.

Previous figures had put GDP growth for the second quarter at 3.7 percent.

The restocking of inventories added about 2.6 percent to Sweden’s GDP growth figures, according to SCB, constituting one of the primary reasons for the upward trend.

“Looking forward a bit, things continue to look good for the third quarter. Based on that, it’s plausible that we’re going to see a real upward bounce in GDP this year, which will recover a large part of the fall in 2009,” he told TT.

Seasonally adjusted GDP increased by 1.9 percent compared with the first quarter of 2010, with household consumption rising by 2.4 percent and government spending up by 3.4 percent, according to SCB.

International trade also picked up, with exports rising by 13 percent and imports by 18 percent, while industrial production jumped up by 6.6 percent.

SCB’s numbers also showed that total employment, as measured as the number of hours worked, increased by 2.1 percent while the numbered of people employed increased by 0.8 percent.

According to Holmgren, SEB may revise its growth forecast in light of the new statistics, but added that the effect of inventories was likely temporary.

Nevertheless, Holmgren emphasized that demand remains strong.

“We can’t expect to have growth close to 5 percent for very long, but if you look at demand, we’re coming back on a broad front,” he told TT.

Holmgren also speculated that if uncertainties about the global economy blow over, the Riksbank may increase the pace at which it raises the repo rate.

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Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s.