Swedish economic growth accelerates in Q2 2018, Riksbank likely to stay on hold in 2018

Swedish economic growth accelerated in the second quarter, as compared to the slowdown seen in the prior quarter. According to the Statistics Sweden’s flash estimate, the GDP grew 1 percent on a sequential basis and 3.3 percent on a year-on-year basis. This was above the central bank’s forecast. The first quarter’s quarterly growth rate was upwardly revised by 0.1 percentage point to 0.8 percent, while the year-on-year print remained at 3.3 percent.

Inventories mainly surprised on the upside in the second quarter, positively contributing 0.5 percentage point to the economic growth on a year-on-year basis. Furthermore, imports came in below expected. All important components such as household consumption, fixed investment and exports came out as expected or softer than forecast. Therefore, the composition of GDP growth is less impressive than what the headline figure implies, noted Nordea Bank in a research report.

Household consumption saw good growth in the first half year while fixed investment is losing steam partially due to falling housing construction. Exports have been surprisingly subdued. Domestic growth is likely to decelerate going forward, and indicators do not imply that exports will gear up. Consequently, GDP growth is likely to decelerate going forward, stated Nordea Bank.

“Strong GDP growth is welcomed by the bank, but we still expect the Riksbank to stay on hold this year as the majority of the Riksbank’s Executive Board still considers inflation as fragile”, added Nordea Bank.