Sweden’s economic growth slowed less than estimated in the third quarter as consumers kept up spending even as the crisis in the euro area prompted exporters to cut jobs.
Gross domestic product expanded a seasonally adjusted 0.5 percent, compared with growth of 0.7 percent the prior quarter, Stockholm-based Statistics Sweden said today. Annual growth slowed to 0.7 percent from 1.3 percent, the agency said. The expansion was estimated at 0.2 percent for the quarter and at 0.5 percent for the year in a Bloomberg survey of 11 economists.
Sweden’s central bank has signaled it may cut interest rates again next month, after three reductions since last year, as a recession in the euro area hurts exporters in the largest Nordic economy. Companies such as Ericsson AB, the world’s biggest maker of wireless networks, and truckmaker Volvo AB are cutting jobs to cope with the reduced demand. About 70 percent of Swedish exports go to Europe.
“The fourth quarter we believe will look considerably worse and the first quarter will also be a weak quarter before things start to stabilize,” said Annika Winsth, chief economist at Nordea Bank AB in Stockholm. The bank will have to cut its main lending rate to 1 percent next month and possibly by another 0.25 of a percentage point in February, she said.
The krona was unchanged at 8.6139 per euro and gained 0.2 percent to 6.6339 per dollar as of 10:42 a.m. in Stockholm. Sweden’s two-year note yield was unchanged at 0.72 percent.
Exports fell an annual 2.3 percent in the period, while consumer spending rose 1.3 percent. Investments slid 0.4 percent from a year earlier. A separate report from the agency today showed that retail sales declined 1.7 percent in October, falling for the second month out of the past three.
Changes in inventories raised GDP by 0.3 of a percentage point, while public consumption increased an annual 1.2 percent.
“The higher contributions from inventories and public consumption indicates that the underlying growth trend probably is slightly lower than indicated by the headline number,” said Olle Holmgren, an analyst at SEB AB, in a client note. “Declining sentiment indicators means that the probability for a December rate cut is very high.”
Sweden’s central bank lowered its repo rate to 1.25 percent in September and last month said another cut was more likely than an increase this winter to cushion the slowdown. Inflation was 0.4 percent in October, below the bank’s 2 percent target.
Manufacturing confidence in the $500 billion economy fell to its lowest level in more than three years this month, while consumer sentiment slid to the lowest in a year. Unemployment will rise to an average 7.9 percent in 2013 from 7.7 percent this year the Organization for Economic Cooperation and Development predicted this week.
“The European economy is hitting primarily our exports and investments” which will result in “a clear slowdown,” Swedish Finance Minister Anders Borg said on Nov. 26. “We will have to track the development closely,” he said after ruling out any immediate additional government funds to boost demand.
Borg in September said the government will spend 23 billion kronor ($3.4 billion), or about 0.7 percent of GDP, next year on infrastructure, research and to pay for cutting the corporate tax rate to 22 percent from 26.3 percent.
Economic growth will slow to 1.2 percent this year from 3.9 percent in 2011, the OECD forecast after Sweden’s industrial production fell an annual 5 percent in September.