Swedish Economic Growth Slows as Euro Crisis Hurts Sales
Sweden’s economic growth slowed less than estimated in the third quarter as consumers continued to spend 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.
While growth was faster than forecast last quarter, “the composition of GDP was worse than expected,” said Torbjoern Isaksson, chief analyst at Nordea Bank AB, in Stockholm, in a note. “Household consumption rose less than we had forecast and investments showed negative growth over the year.”
The krona climbed less than 0.1 percent to 8.608 per euro as of 9:54 a.m. in Stockholm. Sweden’s two-year note yield was little changed 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.
“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 cut the corporate tax rate to 22 percent from 26.3 percent.
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.
“Industry forecasts further staff cuts and unchanged output volume for the next few months,” Sweden’s National Institute of Economic Research said on Nov. 27. “Consumer confidence in the Swedish economy and labor market developments are considerably more negative than normal.”
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