Sweden’s economy shrank by 0.1 per cent through the first quarter, preliminary figures from Statistics Norway (SCB) show on Monday. Annualized, the decline was 1.1 per cent.
The median in Bloomberg’s compilation of economists’ forecasts pointed to growth of 0.2 percent on a quarterly basis. The news agency also points out that Sweden’s central bank estimated flat development in its monetary policy report for March.
According to Trading Economics, declines of 0.1 per cent on a quarterly basis and 0.2 per cent on an annual basis were expected respectively.
– Activity in the Swedish economy continued to weaken in the first quarter of 2024, which is explained by the decline in February and March. The quarter will be the fourth in a row with negative growth, says national economist Mattias Kain Wyatt in SCB.
In the fourth quarter of last year, Sweden’s GDP fell by 0.1 per cent on a quarterly basis and 0.2 per cent annualized.
SCB has also published figures for the retail trade on Monday. These show a volume decrease of 0.4 per cent in March, compared to the previous month.
Expect interest rate cut next week
Torbjörn Isaksson, chief analyst at Nordea Markets, believes the figures show that Sweden has had a “slow start to the year”.
According to Bloomberg, he writes in a note that household consumption should start to pick up again, but that it will barely affect inflation. He also points out that the improved outlook in Sweden is also based on expectations of interest rate cuts.
Isaksson himself expects that Sweden’s central bank will begin a series of interest rate cuts in May, according to the news agency.
The Riksbank’s next interest rate decision will come on 8 May – Wednesday next week. At the previous interest rate decision, at the end of March, the central bank chose to keep the policy rate unchanged at 4.00 per cent. At the same time, it was added:
“If the inflation outlook continues to be favorable, the key interest rate can probably be lowered in May or June.”
The central bank’s new interest rate path indicated that it is likely to cut interest rates three times this year.
In March, inflation in Sweden fell to 4.1 percent – the lowest level since January 2022 – from 4.5 percent the previous month. The price increase was thus lower than expected. The consensus was 4.4 percent, according to Trading Economics.
The Riksbank now believes in an average inflation of 3.5 per cent this year, and an inflation of 1.5 per cent next year – well below the target of 2 per cent.
