Swedish economy faces recession in Q3 as GDP contracts beyond expectations

Posted on December 4, 2023   |  

Sweden officially entered a Q3 recession, with a 0.3% economic contraction due to increased interest rates impacting consumer spending and investments.

The GDP contracts by 1.4% compared to last year's quarter, surpassing the initial estimate of a 1.2% shrinkage.

2 straight quarters of negative growth meet the common recession definition.

The Riksbank, Sweden's central bank, raised rates from zero to 4% in the past 18 months, with the latest policy decision maintaining the current rate.

Higher interest rates particularly affect households, especially mortgage holders with floating rates, reducing their spending power.

Housing starts to plummet as construction companies grapple with elevated funding costs. 

Household consumption saw a 0.6% decline in Q3, with reduced expenditure across most categories. 

Changes in inventories contribute negatively to GDP by 1.4% points, primarily due to decreased industrial inventories.