Swedish Economy Expands Less Than Estimated in Third Quarter
Gross domestic product grew 0.1 percent in the three months through September, Statistics Sweden said today. That missed the 0.5 percent growth predicted in a Bloomberg survey. The economy expanded 0.3 percent from a year earlier. The krona slid 0.1 percent to 8.9125 per euro as of 10:29 a.m. in Stockholm.
“The GDP figure is pretty neutral in relation to expectations, so our main case is still for the Riksbank to cut rates in December,” said Olle Holmgren, an analyst at SEB AB in Stockholm. “Inflation is still low, there are pressures from abroad and one shouldn’t forget that growth is still well below trend.”
The Riksbank is under increasing pressure to lower rates as the $540 billion economy grapples with slack export demand and after consumer prices unexpectedly declined in October. Policy makers have struggled to bring inflation closer to the bank’s 2 percent target without stoking an overheated housing market and record debt.
Riksbank First Deputy Governor Kerstin af Jochnick told reporters in Stockholm today that recent confidence data, which rose the highest in more than two years, were important and that she sees no problem with inflation expectations.
The statistics agency revised the contraction in the second quarter to 0.1 percent from 0.2 percent previously. Annual growth in the second quarter was raised to 0.6 percent from 0.1 previously.
There are signs of strength in the domestic economy, including rising investments, analysts at Nordea Bank AB said.
“Add to this the rising housing prices and the swift upturn in employment, and much suggests that the domestic economy hardly needs additional stimuli through lower interest rates,” Torbjoern Isaksson, chief analyst at Nordea, said in a note. “We expect the Riksbank to stay on hold in December, despite persistently low inflation.”
Consumer spending rose an annual 2.1 percent in the third quarter and investments rose 3.3 percent, the statistics agency said. Production of goods slid 2.1 percent and exports declined 1.6 percent. Inventory cuts reduced GDP by 1.6 percentage point.
The bank last month said it won’t cut its main lending rate further after keeping it unchanged at 1 percent for a fifth meeting in part to prevent debt imbalances.
While consumer prices fell 0.1 percent last month, low rates have pushed household debt to more than 170 percent of disposable income. A report published last week also showed confidence of Swedish companies and households rose to its highest level in more than two years.
Sweden’s government has vowed to spend 24 billion kronor ($3.7 billion) next year on new initiatives, mainly on income tax cuts, to boost domestic demand as exports struggle to gain ground. SEB AB this week predicted Sweden’s economy will grow 0.7 percent this year and 2.5 percent in 2014.
The Riksbank announces its next rate decision on Dec. 17.
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