(Bloomberg) — Sweden’s economy held up better than expected in November, indicating that the largest Nordic country could have returned to growth in the last three months of 2023.
A flash estimate from Statistics Sweden showed gross domestic product increasing by 0.2% from the previous month, while economists surveyed by Bloomberg had estimated an 0.6% contraction.
The reading comes after the indicator for October showed growth clearly outpacing expectations, despite the backdrop of an economy that has been hit hard by interest-rate increases and rising prices. That’s squeezed consumers, hurting spending and construction.
Danske Bank A/S’s chief economist for Sweden, Michael Grahn, said the latest data indicates that output expanded in the fourth quarter, following two consecutive quarters of contraction.
That development would indicate a more positive outcome than the 0.4% contraction that Sweden’s Riksbank projected in late November, when it decided to keep its benchmark rate unchanged, citing slowing inflation and a weakening economy.
The central bank, as well as the European Commission and several other banks, still expect Sweden to undergo two consecutive years of contraction — last year and this. The number of bankruptcies has risen to the highest since the 1990s recession.
Other data published Wednesday by the statistics agency showed that retail sales as well as household consumption declined from a month earlier, while orders to the country’s manufacturing sector returned to growth.
While the Riksbank has indicated that it will keep its policy rate at 4% through 2024, most economists believe it will start reducing borrowing costs by early summer, and economists at Swedbank AB said they don’t expect the latest batch of data to shift that course.
“As the underlying data indicates weak domestic demand, we do not think the Riksbank will interpret the outcome as a sign of a strengthening economy,” Pernilla Johansson and Maria Wallin Fredholm said in a note. “We stick to our view of a first rate cut in June.”
–With assistance from Joel Rinneby.
(Adds chart, details and economist comments from fifth paragraph.)
