Trade war concerns add to Sweden’s economic troubles

Bloomberg

The growing trade war is adding to domestic troubles for the largest Nordic economy.
Gross domestic product data is expected to show Sweden’s economy grew a meager 0.2 percent in the first three months of the year, according to a survey. The annual expansion likely slowed to 1.7 percent.
The export-dependent nation is feeling the weakness that’s already hit the euro area, its largest trading partner. Exports are losing momentum and domestic demand is being held back by a wobbly housing market, which is curtailing construction and making households more reluctant to spend.
And a simple tweet could easily make the outlook much worse. Home to Volvo, Sweden is on the front-line should US President Donald Trump decide to impose import tariffs on European cars.
Such a scenario would probably make it impossible for the Riksbank to go through with its plans to lift rates above zero again. The Swedish central bank has started to backtrack on its planned tightening after the Federal Reserve and the European Central Bank signaled they were pulling back from any policies that would constrict growth.
“It’s important for inflation that domestic demand keeps up,” said Andreas Wallstrom, an economist at Swedbank. “In case of a sharper downturn we’ll probably see an even softer Riksbank and an even weaker krona.”
On Tuesday, data from the National Institute of Economic Research showed a drop in overall economic confidence to the lowest level in 4 years in May, with consumer confidence sliding to more than six-year low. Export volumes rose 4 percent in the first quarter from a year earlier, while imports were unchanged, a separate report showed.
The krona has plunged to near record levels, indicating a growing bet that rates will remain near record low levels and a sign of the risks facing the Swedish economy.
The bleak forecasts for the first quarter should, however, be viewed against the backdrop of the previous quarter, when the
economy expanded 1.2 percent, twice as fast as estimated. Views also vary widely, with one economist calling the economy “surprisingly resilient.”