Swedish Q2 economic growth downwardly revised to 1.3 pct sequentially and 3.1 pct y/y

The Swedish economic growth for the second quarter was downwardly revised on Wednesday, as expected. But the economic growth for the earlier years was upwardly revised. Furthermore, cost pressures are higher than previously known, noted Nordea Bank in a research report.

The second quarter economic growth was downwardly revised to 1.3 percent sequentially and 3.1 percent year-on-year. The flash estimate showed the economic growth at 1.7 percent quarter-on-quarter and 4 percent year-on-year.

Inventories, household consumption and fixed investment mainly drove the downward revision to the economic growth. Therefore, important components for domestic demand were less upbeat. Meanwhile, exports showed stronger growth as compared to the flash estimate. Therefore, the economy was mostly driven by foreign trade rather than domestic demand. Imports were upwardly revised sharply.

The lower than expected growth for the first half of 2017 was balanced by stronger growth in previous years. The 2015 economic growth was upwardly revised by 0.4 percentage point to 4.5 percent, whereas the economic growth for 2016 was revised up by 0.1 percentage point to 3.3 percent. Therefore, GDP is at the exact same level in the second quarter as the earlier figures showed.

Productivity was more moderate in 2017. Unit labor cost was revised higher, not only for 2017 but also for 2016.

The revised data for second quarter GDP is not a game changer for the central bank. Growth in domestic demand is slightly weaker; however, the overall picture is that the Swedish economy is solid and the labor market is very tight.

“We see the revisions as slightly “hawkish”, as unit labour cost was revised up. This gives the Riksbank hope that inflation will stabilise at desired levels”, added Nordea Bank.

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