Sweden’s economic growth slowed last quarter, underscoring the need for more support measures as the central bank signals it’s ready to expand its stimulus package.
Gross domestic product grew an annual 2.5 percent in the three months through March, compared with a revised 2.6 percent in the prior quarter, Statistics Sweden said. Analysts surveyed by Bloomberg forecast a 2.8 percent expansion.
“It was a bit weaker than expected, and below the Riksbank’s forecast,” said Michael Grahn, an analyst at Danske Bank A/S. “Everyone knows that really, inflation is the important thing for the Riksbank. But of course, it would have been better from the Riksbank’s point of view if it had come in slightly stronger.”
The central bank this year cut interest rates to negative for the first time and started buying government bonds to boost demand and prevent deflation from taking hold. That has helped domestic demand, propelled stock and house prices higher and helped counter sluggish exports.
The economy, home to Hennes & Mauritz AB and Ericsson AB, grew a quarterly 0.4 percent in the period, missing analysts’ estimates of 0.6 percent.
Fixed investment fell 0.1 percent from the fourth quarter, while exports decreased 0.7 percent and imports dropped 1.5 percent. Private spending growth slowed to 0.1 percent from 1.3 percent in the previous quarter.
“If one looks at the underlying development it’s relatively solid” since the lower private spending can largely be explained by reduced housing costs, said Magnus Alvesson, head of forecasting at Swedbank AB. That “signals that households’ finances remain strong and that there’s significant room for an increase going forward,” he said.
The central bank, which predicted 2.7 percent growth in the quarter, has said it’s prepared to cut its rate further from minus 0.25 percent and expand a bond buying program from 90 billion kronor ($10 billion) to safeguard its 2 percent inflation target. The bank holds its next rate policy meeting on July 1.
Sweden fell back into deflation in April, after consumer prices rose less than 0.2 percent in the previous two months. Inflation has held below target since late 2011.
Meanwhile, figures today showed lending to households accelerated for a fifth month to an annual 6.5 percent in April -- its highest level in almost four years. Mortgage lending increased an annual 6.9 percent.
“That’s a very clear signal that households aren’t very worried or think that they need to slow down so we think that households will be an important growth engine also going forward,” said Annika Winsth, chief economist at Nordea Bank AB in Stockholm. “The Riksbank will conclude that this was in line with its expectations, period.”