Swedish Economic Growth Decelerates Dramatically
Preliminary numbers indicate that Swedish economic growth fell to just 0.7% in the second quarter. Using my terms of trade adjusted approach, growth was even slower at just 0.2%.
Unlike the American numbers, which were stronger than other indicators indicate, the Swedish numbers were weaker than one would expect given other indirect indicators. That Sweden will head into a recession is likely, but it seems implausible that so much of the slowdown had happened already by the second quarter. Most likely, this is the result of a too big calendar adjustment. I therefore find it likely that there will be future upward revisions, though probably not so much already by the next release of these same numbers in September.
At any rate though, regardless of how much of the slowdown had occurred duing the second quarter, it seems clear that Sweden will fall into a recession. The political blame game is all too predictable with the Social Democrats continuing with their confused attacks on a supposedly too expansive fiscal policy, only to propose more fiscal expansion themselves, in the form of increased government investments. Logical consistency ,or learning from Japan's failure to boost its economy with government investments in the 1990s, appear to be overrated virtues according to the Social Democrats. Most right-wing pundits on their hand either completely ignore the numbers or simply urge people not to "panic" while not explaining why the downturn has started.
Had they read and spread the conclusions of my Timbro report they would have had a good explanation for the problems. But now that they don't, the nonsensical Social Democratic theory risks becoming the explanation accepted by most Swedes. A bad theory always beats no theory.
Unlike the American numbers, which were stronger than other indicators indicate, the Swedish numbers were weaker than one would expect given other indirect indicators. That Sweden will head into a recession is likely, but it seems implausible that so much of the slowdown had happened already by the second quarter. Most likely, this is the result of a too big calendar adjustment. I therefore find it likely that there will be future upward revisions, though probably not so much already by the next release of these same numbers in September.
At any rate though, regardless of how much of the slowdown had occurred duing the second quarter, it seems clear that Sweden will fall into a recession. The political blame game is all too predictable with the Social Democrats continuing with their confused attacks on a supposedly too expansive fiscal policy, only to propose more fiscal expansion themselves, in the form of increased government investments. Logical consistency ,or learning from Japan's failure to boost its economy with government investments in the 1990s, appear to be overrated virtues according to the Social Democrats. Most right-wing pundits on their hand either completely ignore the numbers or simply urge people not to "panic" while not explaining why the downturn has started.
Had they read and spread the conclusions of my Timbro report they would have had a good explanation for the problems. But now that they don't, the nonsensical Social Democratic theory risks becoming the explanation accepted by most Swedes. A bad theory always beats no theory.
posted by stefankarlsson at 3:10 PM
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