Danish Recovery Taking Hold as Consumers Support Expansion

Denmark’s economy grew more than initially assessed in the fourth quarter as consumer spending last year rose at the fastest pace since 2008.

Gross domestic product in the fourth quarter expanded 0.5 percent from the previous three months, the statistics office said in a statement. Preliminary data on Feb. 27 showed output growth of 0.4 percent. The economy grew 1.5 percent from a year earlier, also better than the 1.3 percent first estimated.

A combination of low interest rates, a falling euro and cheaper oil is helping Scandinavia’s weakest economy recover faster than the central bank and the government have previously expected. Danes have benefited from record-low borrowing costs as the central bank defends the krone’s peg to the euro. Governor Lars Rohde’s effort to prevent krone gains has driven the benchmark deposit rate down to minus 0.75 percent.

“The Danish economy has the wind at its back on all fronts,” said Tore Stramer, chief analyst at Nykredit Markets in Copenhagen, in a note. “Rates are at historic lows, house price gains are spreading across the country, energy prices have fallen, inflation is near zero and there are prospects for the the highest real wage increases in eight years.”

Household spending rose 1.1 percent in the quarter and 1.9 percent for the year, the largest annual gain since 2008. Investments increased 2.5 percent as construction picked up. Imports and exports both declined.

No Stimulus

The economy is set to grow 1.6 percent in 2015, the government said March 27. The Social Democrat-led coalition, which faces elections by September, is seeking to keep deficits in check and can’t further stimulate the $300 billion economy, Economy Minister Morten Oestergaard said last week.

Denmark’s economy grew for a sixth consecutive quarter, the longest streak in 10 years, according to the statistics office. The full-year expansion last year was the first since 2011.

“The expansion is putting a heavy pressure on politicians,” Steen Bocian, chief economist at Danske Bank A/S, said in a note. “In reality, it’s when things are good politicians need to show responsibility and tightening is much harder to do politically when things are good than in times of crisis.”

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