Swedish Economy Unexpectedly Shrinks as Export Slump Deepens

Sweden’s economy unexpectedly shrank in the second quarter as the largest Nordic economy struggles to expand amid slack demand from the recession-plagued euro area.

Gross domestic product contracted 0.1 percent in the three months through June, after growing 0.6 percent in the prior quarter, preliminary data from Stockholm-based Statistics Sweden showed. Annual growth was 0.6 percent, slowing from 1.7 percent. The economy was seen expanding a quarterly 0.1 percent in a Bloomberg survey of 12 economists.

“Despite the weaker-than-expected figures, this will not change the outlook for monetary policy,” said Torbjoern Isaksson, chief analyst at Nordea Bank AB. “The first and the second quarter should be seen together, showing some growth in the first half of the year. Given the favorable conditions for households, we should see a healthy consumption growth going forward, and indicators suggest that exports should improve gradually.”

The central bank this month kept its main rate unchanged and said it will probably start raising rates in the second half of next year as the economy improves. The export-reliant economy’s recovery has been hampered by weak demand from euro-area nations that are struggling to emerge from the bloc’s longest recession since the introduction of the single currency.

The krona slid 0.7 percent to 8.6433 per euro as of 9:48 a.m. in Stockholm.

Exports Fall

Exports declined 0.8 percent in the quarter and household consumption dropped 0.1 percent, the statistics agency said. Government spending gained 0.2 percent and gross fixed capital formation climbed 0.1 percent.

Both manufacturing and consumer confidence rose in June and output is expected to grow 1.5 percent this year, compared to 0.7 percent in 2012, according to central bank estimates.

Finance Minister Anders Borg has said the government needs to keep stimulating the economy next year to boost demand. It’s spending 23 billion kronor ($3.6 billion), or about 0.7 percent of GDP, this year on infrastructure, research and a reduced corporate tax to 22 percent from 26.3 percent.

“The protracted crisis is leaving deep scars and a recovery in Europe is having a hard time gaining traction,” Borg said earlier this month in a statement.

Seasonally adjusted unemployment rose to 8 percent in June from 7.9 percent the previous month, according to Statistics Sweden.

To contact the reporter on this story: Saleha Mohsin in Oslo at smohsin2@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.