Sweden’s economy unexpectedly expanded in January, with gains in exports and household spending contrasting earlier evidence that the largest Nordic economy had likely entered a recession.
(Bloomberg) — Sweden’s economy unexpectedly expanded in January, with gains in exports and household spending contrasting earlier evidence that the largest Nordic economy had likely entered a recession.
Indicator data for gross domestic product showed an increase of 2% from a month earlier, adjusted for seasonal variations, the fastest increase in four months, according to data published by Statistics Sweden on Thursday. That compares with a median estimate for a 0.1% decline in a Bloomberg survey of economists.
The data paints a more optimistic picture of the Swedish economy than earlier figures that showed gross domestic product shrank 0.5% in the fourth quarter, suggesting the economy had already entered a recession as consumers are hit by rising prices and worsening credit conditions. It may also add pressure on the Riksbank policymakers to accelerate their benchmark rate hikes.
The news “mainly sends the message that the business side of the economy is doing alright while consumers still suffer from a bunch of negative factors,” said Michael Grahn, chief economist at Danske Bank A/S.
Sweden could be the only European Union member state to experience a full-year contraction this year, according to European Commission forecasts. At the same time, rising core inflation, a weak krona and more aggressive tightening plans by the Fed and the European Central Bank have led economists to revise higher their forecasts for the Riksbank’s key rate. SEB AB earlier on Thursday said it now expects the benchmark rate to be raised by a further 75 basis points to 3.75%.
“The Swedish GDP number showed a broad improvement,” Svenska Handelsbanken AB strategist Lars Henriksson said. Consumption was “a lot stronger than expected” with industrial production also “showing strength,” he said, while adding monthly data is volatile.
In a separate release, Swedish industrial orders recorded the largest monthly drop on record in January, at 20.2% in seasonally adjusted terms, which the statistics office said was mainly explained by strong December orders.
Read More: SEB Economists See Deeper Contraction in Swedish Economy in 2023
–With assistance from Joel Rinneby.
(Updates with analyst comments from fourth paragraph.)
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