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'Show of strength' from Swedish economy

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'Show of strength' from Swedish economy
Increased house-building activity has been a key growth factor. Photo: Lars Pehrson: SvD/TT
15:27 CET+01:00
Sweden's economy is growing faster than expected and is now at an historically high level, according to figures from national number crunching body Statistics Sweden.

Sweden's gross domestic product (GDP) grew by 3.9 percent in the third quarter compared with the same period last year. It has also risen 0.8 perent on the second quarter of 2015.

This was much stronger performance than most economists had expected, according to a poll by news agency, Reuters.

GDP is one of the most important indicators used to assess the health of a nation's economy and represents the total value of goods and services produced over a set length of time. Consistent growth is one of the key signifiers that a nation's economy is performing strongly.

Expectations had been for a 3.4 percent growth compared with last year and 0.4 percent compared with the second quarter.

“They are strong numbers from a historical perspective. The average growth in Sweden over the past 20 years is about 2.5 percent,” Nordea Bank's chief economist Annika Winsth, told Swedish news agency, TT.

“It’s a real show of strength from the Swedish economy.”

Household consumption drove much of the growth with increased spending on cars and holidays. But there were also positive contributions from exports and housebuilding.

The weaker-than-normal Swedish krona has strengthened the export industry, which has also benefited from a stronger European market. 

“Population growth and increased construction are two key factors driving the growth,” Olle Holmgren, economist at SEB said.

“House construction has really taken off,” Holmgren said. “The number of housing starts in the third quarter was at its highest level since the early 1990s.”

“Demand for housing indicates that this boom will continue through 2016 and 2017.”

The large numbers of asylum-seekers in the country are also expected to contribute to growth in the future, firstly through increased public consumption and later through personal spending, once they enter the jobs market.

The figures back up a report from Nordea earlier this month, in which the bank suggested Sweden's economy was not likely to be damaged in the wake of the influx of new arrivals and could even receive a boost.

The strong figures pile pressure on the Swedish Central Bank’s (the Riksbank) Governor Stefan Ingves not to cut interest rates again in December.

“The figures suggest the Riksbank should not act,” says Nordea's Winsth.

 

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