Sweden’s economy shrank far more than anticipated in August, driven by a slump in exports, raising concerns the recovery of the largest Nordic economy may be cut short.

Gross domestic product contracted 3.8 percent in August, the biggest fall since the monthly indicator was launched in February, according to a flash estimate from Statistics Sweden. Economists surveyed by Bloomberg predicted a 0.5-percent decline.

The Swedish krona extended its decline to trade 0.5 percent weaker against the euro after the data, which may vindicate the central bank view that it’s still too soon to dial-back the pandemic-era stimulus. The Riksbank has resisted the temptation to signal when it would raise borrowing costs above zero, defying a hawkish turn among major central banks.

Sweden’s economy, which regained its pre-pandemic size faster than most industrialized nations, is being increasingly hit by supply-chain bottlenecks. The trade deficit widened last month to highest level in five years, with exports falling to the lowest level since January.

“Pretty ugly Aug data coming out of Sweden today. If not a sign of stalling recovery at least a real set-back extreme growth bulls.”—Michael Grahn (@MichaelGrahn1) October 6, 2021.

Image courtesy of Fredrik Lerneryd





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