‘Low Growth Crisis’ Called Off in Denmark After GDP Rebounds

Denmark bounced back in the first three months of 2016, quashing speculation that Scandinavia’s smallest economy might have entered an extended period of low growth after a poor end to 2015.

Gross domestic product grew by 0.5 percent on a quarterly basis and 0.6 percent on the previous year, according to better-than-expected data from Statistics Denmark. Economists surveyed by Bloomberg had predicted a growth rate of just 0.1 percent on the previous quarter and no growth year-on-year. Denmark’s economy had barely grown in the previous quarter and had contracted 0.6 percent in the third quarter of 2015.

Key Points: 

  • Exports up 0.6 percent q/q; imports up 0.1 percent; household spending up 0.7 percent q/q; investment up 0.7 percent q/q;
  • 4Q 2015 GDP confirmed at 0.1 percent q/q, 0.5 percent y/y

Big Picture:

After struggling during the second half of 2015, the Danish economy appears to have picked up momentum on the back of strong growth in Germany and Sweden, its two biggest trading partners.

Key Analyst Comments:

  • "Today’s numbers were a positive surprise," said Steen Bocian, chief economist at the Danish Chamber of Commerce. "Growth is pulled by exports, consumption and investments"
  • "Following the weak end to 2015, progress in the first months of 2016 takes some of the edge off the debate on a low growth crisis, though we remain reluctant to predict that a stronger upturn is imminent," said Jes Asmussen of Svenska Handelsbanken
  • "Despite good 1Q GDP growth, Denmark is among the worst in the West, though that may largely be explained by population growth, falling energy production in the North Sea and the fact that we’re investing more abroad," said Danske Bank chief economist Las Olsen
  • "Obviously, Europe doing better helped exports, but the big push for foreign sales seems to stem from the recovery in shipping rates," said Nordea chief economist Helge Pedersen

What’s Next?

Most indicators point to sustained growth in the second quarter, meaning government predictions of a 1.1 percent growth rate for 2016 are not beyond the realm of possibility. But, as Pedersen points out, there’s "substantial uncertainty" on the horizon, with a possible British exit from the European Union a particular source of concern for the Danish economy.

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