Sweden’s economic system contracted by 0.3% within the third quarter, falling into recession, official information confirmed Wednesday, as customers tightened their belts for a fifth straight quarter, with larger rates of interest hitting spending and investments.
The Scandinavian nation is likely one of the worst financial performers within the European Union, with the European Commission forecasting common development of 0.6% within the EU in 2023.
“The gross domestic product (GDP) decreased for the second quarter in a row. The downturn in the economy was broad, but was held back somewhat by strong service exports,” mentioned Jessica Engdahl, part supervisor on the National Accounts with the statistics company.
Sweden’s economic system shrank by 0.8% within the second quarter. Two consecutive quarters of damaging development is the extensively adopted definition of a recession.
“Household consumption was much weaker than expected and posted a negative contribution to GDP for the fifth consecutive quarter, which is in line with the previous longest decline from 1992-93,” Swedish financial institution Swedbank mentioned in an analyst observe.
Figures from Statistics Sweden confirmed that GDP contracted by 1.4% in comparison with the identical quarter final yr, greater than a flash estimate that had indicated GDP would shrink by 1.2%.
“Overall … the outcome confirms a weak development in the Swedish economy,” Swedbank mentioned.
The flash estimate had indicated flat development in comparison with the earlier quarter.
In its assertion, the statistics workplace mentioned the overall downturn was “counteracted in part by strong exports of services,” however family expenditure had been damaging for a fifth consecutive quarter.
“The downturn is mainly explained by a decrease in inventories and reduced household consumption,” it mentioned.
Household consumption fell by 0.6% within the third quarter in comparison with the second, with decreased expenditure in most classes. Changes in inventories contributed negatively to GDP by 1.4 share factors, primarily due to decreased industrial inventories.
Exports had been up by a strong 1.4% from the earlier quarter, with web exports contributing positively to GDP by 1.5 share factors.
The nation has been scuffling with stubbornly excessive inflation for greater than a yr and a depreciating krona – prompting the central financial institution to boost its key fee to its highest stage in 15 years.
The Riksbank, Sweden’s central financial institution, has hiked the speed in speedy succession to 4% from zero 18 months in the past, though it held charges regular on the newest financial coverage resolution this month.
The charges have hit households laborious as a majority of Swedish mortgage holders have floating rates of interest, that means fee modifications instantly scale back their spending energy.
Housing begins have additionally collapsed as building firms battle with larger funding prices.
The authorities lately expressed concern over the nation’s “prolonged economic winter,” as unemployment rose to 7.7% within the third quarter.
The Riksbank has mentioned it expects damaging development of 0.7% this yr and a contraction of 0.2% in 2024.
“The weak growth reduces inflationary pressures and strengthens our view that the Riksbank is done hiking rates,” Nordea mentioned in a observe.
Source: www.dailysabah.com