Swedish economic growth came in above expectations in the first quarter; however, households disappointed. On a quarter-on-quarter basis, GDP grew 0.6 percent, whereas it grew 2.1 percent year-on-year.
Export of services mainly surprised on the upside. The growth was widespread, and might have been stimulated by the rebound of the telecom company Ericsson. Goods exports came on a weaker side. All indicators point to a deceleration in exports, which will probably hit export of services as well going forward, said Nordea Bank in a research report.
There was some disappointing news in the GDP report, making the composition of GDP growth unfavourable. Household consumption eased 0.4 percent on a quarter-on-quarter basis and remained the same on a year-on-year basis.
There are calendar effects at play, dampening consumption in the first quarter. The reason is the Easter came in the second quarter. This signifies that consumption looks set to rise again temporarily in the second quarter. However, household demand is softer than expected and question marks remain for the outlook.
The year-on-year figure for fixed investment was better than anticipated as fourth quarter was upwardly revised, but investment dropped on the quarter. Therefore, domestic demand, which is the focal point for monetary policy, is subdued.
“The stronger than expected Q1 GDP reading point to some upside risks to our forecast for the full year of 2019 at 1.2 percent (Riksbank 1.7 percent). But it is too early to conclude that our forecast is too low as indicators have softened and a bit more than we had expected. We see no reason to change our view on the Riksbank. The next rate hike remains distant”, added Nordea Bank.
