Swedish economy contracts more than expected on trade, revisions

Bloomberg

Sweden’s economy shrank more than initially reported in the first quarter, partly as a result of sluggish levels of exports and upward revisions to statistics in previous years.
Gross domestic product contracted 0.8% in the three months through March from the prior quarter, the first decline since the fourth quarter of 2020, Statistics Sweden said. That compares with the April flash estimate of a 0.4%-fall, a level matching the forecasts of economists polled in a Bloomberg survey.
While the biggest Nordic economy has rebounded well from the pandemic, households in Sweden are now feeling the pinch with inflation accelerating to its highest level in more than three decades. Russia’s war against Ukraine and an expected series of rate hikes by the Riksbank are also weighing on consumer confidence.
“The drop in Q1 GDP is not concerning as it was mainly due to external factors, while demand remained strong,” Nordea’s economist Torbjorn Isaksson said in a note to clients, citing restrictions from the last wave of the pandemic and a shortage of input goods. He said he expects “decent growth” in the current quarter, “as also indicated by the very strong labour market figures.”
Net exports lowered Swedish GDP by 0.7 percentage points in the first three months of 2022, as imports grew by 2.8% from the previous quarter, the fastest increase since the end of 2020. Exports rose 1%, the least since contracting in the second quarter of last year.
For 2021, Sweden’s economic expansion was revised up by 0.3 percentage points to 5.1%, while the contraction in 2020 was also recalculated to 2.2% from the previous estimate of 3%.
DNB economist Oddmund Berg said in a note that the Swedish central bank will probably brush off the contraction being deeper than its own estimate of negative 0.2% because of “their recent focus on inflation and quite aggressive rate path, as well as the fact that the ‘miss’ was driven by trade figures (being volatile by nature) and the domestic development looking to be largely in line with expectations.”