Swedish Q2 GDP growth rate likely to be revised down from flash estimate – Nordea Bank

The Swedish second quarter economic growth data is set to be released this week. The economic growth is likely to be downwardly revised from its flash estimate. The flash estimate for the second quarter that was published at the end of July indicated a surprisingly solid GDP growth at 1.7 percent quarter-on-quarter and 4 percent year-on-year. According to a Nordea Bank research report, the economic growth is expected to be revised down by 0.5 percentage points to 1.2 percent quarter-on-quarter and 3.5 percent year-on-year.

The reasons for the lower growth are new information on inventories and household consumption. Meanwhile, exports are expected to have come in stronger than as indicated by the flash estimate. Lower economic growth signifies that productivity was more moderate and unit labor cost higher than previously assumed. Therefore, it might appear as cost pressure are rising.

But the lower GDP growth should be seen as dovish as lower resource utilization than previously known gives less hope for inflation to accelerated longer out, particularly as it is domestic demand that looks more subdued, noted Nordea Bank.

There is no game changer for the Riksbank as the economy is still solid and the labor market tight, but on the margin it underpins the view than a rate hike continues to be distant, added Nordea Bank.

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