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SWEDEN: Inventories Skewed Q3 GDP Higher, Underlying Demand Still Weak

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The largest upward contributor to Q3 GDP was inventories, which added 0.6pp to the 0.3% Q/Q print. This suggests that markets and the Riksbank should not read into the “stronger-than-expected” reading too much, with underlying domestic economic conditions still weak and supporting the case for further policy easing. 

  • Domestic demand (private consumption, gross fixed capital investment and public consumption) added just 0.2pp, while net trade subtracted 0.5pp.
  • Private consumption growth was flat in Q3, which is somewhat at odds with the recovery seen in the monthly household consumption indicator. The Riksbank’s base case for an economic recovery in 2025 is in large part expected to be consumption-driven.
  • We noted yesterday that net trade was likely to be a drag on Q3 GDP. Export growth rose 0.6% Q/Q (contributing 0.4pp to GDP), but this was more than offset by a 1.7% Q/Q rise in imports (subtracting 0.9pp from GDP).
  • From a production perspective, services producers value added rose 0.9% Q/Q, but goods (-1.4% Q/Q) and manufacturing (-1.7% Q/Q) dragged. Hours worked fell 0.4% Q/Q.
  • Looking at revisions: Q2 GDP was revised 3 tenths higher to 0.0% Q/Q, but Q1 was revised two tenths lower to 0.6% Q/Q. 2023 revisions were also a little mixed.

 

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The largest upward contributor to Q3 GDP was inventories, which added 0.6pp to the 0.3% Q/Q print. This suggests that markets and the Riksbank should not read into the “stronger-than-expected” reading too much, with underlying domestic economic conditions still weak and supporting the case for further policy easing. 

  • Domestic demand (private consumption, gross fixed capital investment and public consumption) added just 0.2pp, while net trade subtracted 0.5pp.
  • Private consumption growth was flat in Q3, which is somewhat at odds with the recovery seen in the monthly household consumption indicator. The Riksbank’s base case for an economic recovery in 2025 is in large part expected to be consumption-driven.
  • We noted yesterday that net trade was likely to be a drag on Q3 GDP. Export growth rose 0.6% Q/Q (contributing 0.4pp to GDP), but this was more than offset by a 1.7% Q/Q rise in imports (subtracting 0.9pp from GDP).
  • From a production perspective, services producers value added rose 0.9% Q/Q, but goods (-1.4% Q/Q) and manufacturing (-1.7% Q/Q) dragged. Hours worked fell 0.4% Q/Q.
  • Looking at revisions: Q2 GDP was revised 3 tenths higher to 0.0% Q/Q, but Q1 was revised two tenths lower to 0.6% Q/Q. 2023 revisions were also a little mixed.