Swedish GDP Grows 1.0% in Q2, Led by Fixed Investment and Exports of Services

Sweden's GDP expanded by a 1.0% quarterly amount in Q2, Statistics Sweden reported this morning, a pickup from 0.7% in Q1. Year-on-year growth was 3.5%, compared to 3.0% in Q1. The gain during 2006 was 4.2%.

Two demand sectors dominated: fixed investment and exports of services. Investment actually slowed a bit from Q1, but at 2.0%, still had a sizable gain; Q1 had been 3.2%. The later figure is 9.2% ahead of the year earlier. The growth was concentrated in the private sector, which saw a 10.2% gain from Q2 2006. Consumer spending by households rose 0.6% in both Q1 and Q2 and was ahead of early 2006 by 2.5%, in line with the last several years. In the graph here, the "recession shading" covers periods of recession in Sweden, one of 17 countries besides the United States included in the "recession country" feature of DLXVG3; this item is not new, it's been part of Haver'sa software for several years.

Sweden is a very "open" economy; its exports and imports added together made 97% of GDP in Q1, measured in nominal terms. For comparison, the EA-13 countries together have just over 80% of GDP involved with exports or imports, and in the US, the figure is a modest 28%. [All of these shares are calculated using nominal data in local currency.] So Sweden's trade is important. We see that the performance of exports during the first half of this year is divided: goods exports fell, by 0.2% in Q1 and 0.6% in Q2 [growth rates compare values in chained 2000 Swedish Kronor], while services surged by 3.1% in Q1 and 4.4% in Q2. These strong gains put Q2's volume of services exports more than 13% ahead of a year ago. They have increased at a double-digit year-on-year pace continuously since Q4 2003.

On the import side, goods imports also fell in Q2, by 0.6%, although they had expanded 2.1% in Q1. Imports of services have also been growing, but not nearly as fast as exports. Their annualized growth has averaged 8.7% since the first quarter of 2005.

The detail in this early GDP report does not permit us to see which services exports are making for the category's strength. However, the data on value added by industry do show that the transportation & communications sector and the hotel-restaurant sector have seen sizable increases. So have the construction and business services industries. So Swedish firms working abroad or working for international clients are adding significantly to growth in Sweden, and it looks that travel and tourism in Sweden are also on the rise. Notably, unlike a number of other countries' economies, the finance and insurance sector has not experienced particularly vigorous expansion. It is keeping up, as seen in the last graph here, but it is not the growth leader as it is elsewhere. Sweden's comparative advantages lie in other areas.