Sweden’s economy contracted more than first estimated in the second quarter as weak demand from Europe held back exports and investments declined.
Gross domestic product shrank a quarterly 0.2 percent in the three months through June, revised from a 0.1 percent drop, Statistics Sweden said today. The economy grew 0.1 percent from a year earlier, down from an estimate of 0.6 percent in July.
The krona lost as much as 0.4 percent against the euro, and traded 0.2 percent lower at 8.6893 as of 10:17 a.m. in Stockholm. The difference in yield on Sweden’s two-year note and similar-maturity German debt narrowed to 101 basis points from 103 basis points yesterday, according to data compiled by Bloomberg.
“The level of GDP is lower than previously known, which should affect the Riksbank’s assessment of resource utilization,” Torbjoern Isaksson, chief analyst at Nordea Markets Research, a unit of Nordea Bank AB, said in an e-mailed note. “Add to this the weak start to the third quarter and the first rate hike from the Riksbank seems more distant.”
Sweden’s central bank said last week it won’t raise its main interest rate until late next year after keeping it at 1 percent for a fourth meeting to support demand. The $540 billion economy, home to Ericsson AB and Volvo AB, has suffered higher unemployment than in neighboring Norway and Denmark as its exporters cut jobs to stay competitive.
Household consumption rose an annual 1.9 percent in the second quarter and public spending rose 2 percent. Exports fell 2.3 percent, Statistics Sweden said today. Fixed investments fell 3 percent on the year, while inventories boosted growth by 0.4 percentage point in the quarter, it said.
Sweden’s government said last month it will spend 25 billion kronor ($3.8 billion) on new initiatives next year to boost the economy, which it predicts will grow 1.2 percent this year and 2.5 percent in 2014. Prime Minister Fredrik Reinfeldt has said he wants to spend most of the money on a fifth round of income tax cuts since he came to power in 2006.