This comment has been updated after Statistics Sweden's update of new figures for foreign trade. All figures below are adjusted to the updated release of the national accounts, as of 6 March 2022. The upward revision of Q4 GDP does not change the picture that the Swedish economy is slowing down. Our main concern of diminishing domestic demand remains.
GDP growth for Q4 stood at -0.5% q/q and -0.2% y/y, revised up from the preliminary -0.6% q/q and -0.6% y/y. The outcome was in line with our forecast at -0.5% q/q and stronger than the Riksbank’s forecast -1.4% q/q. The figures are somewhat more uncertain than usual due to seasonal factors.
The report contained upward revisions of all four quarters in 2021, bringing the full-year figure to 5.2% from previously 4.9%. The upward revision of 2021 subsequently contributed to pushing down the y/y figure for 2022, even though the first and third quarters of 2022 were revised up.
Hence, coming from a stronger 2021 than anticipated coupled with a weak ending of 2022, GDP growth for FY 2022 came in at 2.6%, which was lower than both our call and the Riksbank’s at 2.9% and 2.7% respectively. Notably, when looking at the GDP level after the revisions, current GDP development is right in between our and the Riksbank’s forecasts (see chart below).
Looking at details for the Q4 figure:
- Inventories fell and subtracted a full 0.8% point to Q4 GDP on the quarter, mainly due to a large inventory reduction in the private services sector.
- Fixed investment fell by 1.0% q/q, as lower activity in the property sector reduced construction investment.
- Government consumption rose by 0.2% q/q.
- Exports rose by 0.5% q/q while imports decreased by 0.9% q/q, respectively. Net exports provided a positive contribution of 0.6 percentage points to quarterley growth.
- Household consumption decreased by 0.4% q/q. Due to a substantial downward revision in Q3 from -0.2% q/q to -1.8% q/q, the full-year figure came in at a mere 2.2% (our forecast: 2.9%).
- Output in goods-producing industries fell by 0.7% q/q. Manufacturing production decreased by 1.2% while service sector production declined by 0.5%.
Elsewhere, figures from the Swedish Mediation Office showed that wage growth increased to 3.1 percent y/y in December, a tad higher than forecast. High inflation erodes real wages, which dropped by 7.1 percent compared to the same month last year. Furthermore, producer prices fell by 5.2% m/m (+11.8% y/y), thanks to lower electricity prices.
All in all, the Swedish economy is facing a broad slowdown. A large inventory reduction deepened the fall in Q4, but there are plenty of signs of diminishing domestic demand. The large downward revision to private consumption is particularly concerning, and indicates that households’ resilience has likely been overestimated (read more about our view on the household sector here). This will in turn reduce the demand for labour and lower inflation more markedly. We expect the Riksbank to hike the policy rate by 50bp in April and by another 25bp in June, before staying on hold during the remainder of 2023.

