Tuesday, March 07, 2006

About the Swedish GDP Report

Today the Swedish GDP report were published ( Here is a more detailed Swedish language version of the report). It showed that GDP volume rose by 2.9% in the year to the fourth quarter. Nominal GDP growth were 4.7% and terms of trade adjusted real GDP (the most relevant number) rose 2.4% on the year before. While that is above both the Western European average and the historical Swedish average, it was a lot lower than most analysts had expected ( except me who had predicted in late January that the number would come in lower than consensus estimates.).

And it makes the assertions of leading Social Democrats that "Sweden have the highest growth in Europe" look more silly than ever. Because while the number is again somewhat above the Western European average, it is lower than virtually all Eastern European countries (particularly the Baltic states) and it is also lower than many Western European countries. Published volume growth (I don't have access to terms of trade in most countries so this comparison must be made in volume terms. Given how Sweden's terms of trade is deteriorating any adjustment for that would likely be of disadvantage for the Swedish position) in Greece, Spain and Denmark have already been shown to be higher, and it is almost certainly higher in Ireland and Luxembourg (who have yet to publish their fourth quarter numbers but whose numbers for earlier quarters have been far higher than in Sweden) too. Outside of the EU, Norway and Iceland likely also outperformed Sweden.

And this is despite the inflationary credit boom sparked by the low interest rate policies of the Swedish central bank, Riksbanken. The cyclical element of growth was thus much greater in Sweden than in the rest of Europe.

Another worrisome element was that government purchases again increased faster than overall GDP. Government purchases ( consumption+ "investments") increased 5.7% in nominal terms (what matters in this context) versus overall nominal GDP growth of 4.7%. Government purchases is now 31.1% of GDP in Sweden versus 19% in America and 9% in Hong Kong. This bodes ill for the future too.


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