Swedish Economy Grinding to a Halt on Trade War, Housing Slump



Rafaela Lindeberg | Bloomberg

Swedish growth all but stalled in the first half of the year, as a mounting global trade dispute weighed on the Nordic region’s largest economy.

Revised gross domestic product data out Friday from Statistics Sweden showed growth of just of 0.1% in each of the first two quarters of 2019. The annual expansion was revised down to 1.0% from 1.4%.

Key Insights

  • Sweden’s trade-dependent economy has been losing momentum amid a trade dispute between the world’s biggest economic powers and uncertainty concerning the U.K.’s exit from the European Union.
  • The report on Friday showed exports were unchanged in the quarter while consumer spending was up 1.1%. Investments declined 1.0%, weighed down by the cooling housing market.
  • Sweden’s central bank has so far bet that the economy won’t slide into a recession. Policy makers last week stuck to a plan to tighten toward the end of the year, exiting almost half a decade of negative rates.
  • Data earlier this week showed a drop in all of the Riksbank’s core measures of inflation, raising speculation that the world’s oldest central bank will need to drop its tightening bias already in October.
  • Non-adjusted data showed first quarter and second quarter was revised lower by 0.4 percentage point and 0.3 percentage point, respectively.

What Economists Say

  • Knut Hallberg at Swedbank called the data “a disappointment for the Riksbank” and krona “negative.”
  • Michael Grahn at Danske said the “meager” growth rates in the first two quarters confirm that Sweden is experiencing a slowdown.
  • Mikael Sarwe, a strategist at Nordea, said Sweden is now heading for “0% growth in late 2019/early 2020.”

Market Reaction

  • The krona slid 0.04% to 10.6512 per euro as of 10:04 a.m.

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