Very Weak Swedish Export Growth

The Swedish statistical central bureau reports that the Swedish trade surplus fell from 12.7 billion kronor May 2006 to 9.7 billion kronor May 2007. For the first 5 months of the year, the surplus fell from 70 billion kronor to 57.7 billion. This is perhaps not surprising given the sharp credit driven increase in domestic demand.

But what was surprising was how this seems mainly due to weak exports rather than strong imports. Exports actually fell in May compared to a year before and for the first 5 months; export growth was a mere 4%, which is very weak. This could mean that domestic demand is strong that Swedish companies divert their resources for domestic demand rather or it could mean that some other factor is involved. Or more likely a combination of the two.

While country and commodity breakdown for May is not yet available, the weakness in exports during the first quarter reflected the important "other"-factor of a 52% decline in forest product exports to the United States, presumably reflecting the U.S. housing recession.