Danish economic grows below expectations in Q1 2019, net exports dragged economic growth

Danish economy grew below expectations in the first quarter. On a quarter-on-quarter basis, the GDP grew 0.2 percent. Despite the soft start, the economy is still well positioned to keep a strong growth. Net export mainly weighed in on the growth. Import rose sharply by 3.7 percent on a quarter-on-quarter basis, while export rose 0.5 percent.

Meanwhile, household consumption rose 0.4 percent – in spite of a very solid rise in car sales. Fixed investments rose 1.8 percent in the first quarter, mainly as a consequence of higher investment activity in machinery, transport and intellectual properties. Stockbuilding added 0.5 percentage points to the total growth.

In spite of a slightly soft beginning to the year, the Danish economy is still well positioned to keep a strong growth higher than the long-term growth potential. The positive view is mainly based on households where a combination of increasing purchasing power and huge wealth growth over recent years creates a solid foundation for higher consumption. On the contrary to the years preceding the financial crisis, the current upswings is not driven by rinsing credit growth, and both households and companies run a strong savings surplus. This acts as a strong buffer against any negative impulses from the global economic slowdown.

The biggest threat to the current upswing in the Danish economy is found abroad, noted Nordea Bank. In particular political unrest and new barriers against free trade could limit the expected growth in exports. Also a renewed wave of global uncertainty might put a damper on Danish companies’ investment appetite and ultimate slow growth.

“However, even in this risk scenario the decline in activity will be limited due to the strong fundamentals of the Danish economy, which will make it possible for it to absorb most of this beating from abroad”, added Nordea Bank.