The third quarter saw a 0.3% contraction in Sweden’s GDP as a result of increased interest rates discouraging investments and consumer expenditure.

“GDP decreased for the second consecutive quarter,” the statistics office said in a statement.

The GDP shrank by 1.4% in comparison to the same quarter last year, according to information from the statistics office. This was less than the 1.2% contraction predicted by a flash estimate. Comparing the flash estimate to the prior quarter, growth had been unchanged.

The generally accepted definition of a recession is two quarters of negative growth in a succession.

The statistics agency claimed in its statement that robust service exports “counteracted in part” the overall decline, but household spending had declined for a sixth straight quarter.

Sweden’s central bank, the Riksbank, raised interest rates quickly, from zero to four percent eighteen months ago. However, at this month’s most recent monetary policy meeting, the bank kept rates unchanged.

Households have been severely impacted by the rates because most Swedish mortgage holders have variable interest rates, which means that fluctuations in rates instantly cut into their disposable income.

A decline in housing starts has also occurred as building companies struggle with increased funding costs.

According to the Riksbank, negative growth of 0.7% is anticipated for this year and a 0.2% decline in 2024.

“The weak growth reduces inflationary pressures and strengthens our view that the Riksbank is done hiking rates,” Nordea said in a note.

In the third quarter, household consumption decreased by 0.6% from the previous quarter due to lower spending across most categories. Because to declining industrial inventories, changes in inventories had a 1.4 percentage point negative impact on GDP.

(Adapted from Investing.com)

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