Sweden has been a regular topic on here due to the way its central bank conducted a type of economic test tube experiment, of which more later. That theme is also in play as we look to see the economic consequences of it avoiding the lockdowns which were prevalent in much of the rest of Europe. So if you like another form of test tube experiment which was potentially much more deadly. This morning Sweden Statistics began to bring us up to date.
Sweden’s GDP declined by 8.6 percent in the second quarter of 2020, seasonally adjusted and compared with the first quarter. This according to the preliminary compilation of the quarterly national accounts. Calendar adjusted and compared with the second quarter of 2019, GDP decreased by 8.2 percent.
The initial implication is that Sweden has indeed done better than the nearby Euro area but not by as much as some claimed along the way. However it is still very significant as we note an annual decline of 15% there. None the less we are still told this.
The decrease in GDP is the largest single quarter drop in the directly comparable time series starting 1980.
We do not get a lot of detail but within it there is a glimmer of optimism.
Seasonally adjusted and compared to the preceding quarter the decrease is in large parts driven by falling exports and household consumption expenditure.
GDP numbers struggle with trade via their use of net trade and if imports held up that is a subtraction from the numbers when in this sort of situation it is a sign that the economy is doing better than elsewhere. So as (hopefully) exports recover as other economies do Sweden may also out perform in that phase.
Some caution with the accuracy of the numbers is provided by this and for those unfamiliar with the issue, there are in fact three different ways of calculating GDP.
Before balancing actual GDP growth from the expenditure approach was -9.0, with the corresponding figure for the production approach at -6.6 percent. Both these are growth rates compared to the corresponding quarter the previous year. Averaging the two give the final actual GDP growth of -7.8 percent.
Si we have a 2.4% difference which highlights an issue I raise from time to time. Not quite as bad as the one I observed in Portugal at one point in the Euro area crisis which approached 4%. At this time we could use them as a sort of confidence interval as in the GDP fall was between 6.6% and 9%. Of course that is far too sensible to become widely accepted.
In general it is the output version which is used and in my home country the UK for example the other two measures are adjusted to it. That has its flaws as it means trade flows which you pick up from expenditure numbers can be “adjusted”. But using the expenditure method has its issue as for example Japan has found itself producing unusually erratic numbers. For completeness there is also the income version. It is not a surprise for it to be missing initially as for example tax figures which take time are useful to give a full picture, and it is a shame Sweden looks like it ignores them.
In the circumstances any improvement is welcome.
In seasonally adjusted figures, private sector production increased by 0.7 percent compared with May 2020.
One might have hoped for more than that although a post lockdown bounce would have to reply on exports. Thus the annual picture is similar to the GDP one above.
Production in the industry sector decreased by 9.1 percent in June 2020 compared with the corresponding month last year, in calendar adjusted figures
As to the detail this is no great surprise.
The largest downward contribution to total private sector development came from the motor vehicle industry, which decreased by 16.7 percent in fixed prices and contributed -0.6 percentage points.
Nor I guess is this.
The largest upward contribution to total private sector development came from the chemical and pharmaceutical industry, which increased by 33.9 percent in fixed prices and contributed 0.8 percentage points.
Id we switch to the service sector we see a similar pattern.
Production in the services sector decreased by 8.4 percent in June 2020 compared with the corresponding month last year, in calendar adjusted figures.
However there was some news which will have the Riksbank popping a few champagne corks.
The largest upward contribution to total private sector development came from real estate services, which increased by 2.2 percent in fixed prices and contributed 0.3 percentage points.
Indeed with construction falling less than the other sectors the Riksbank will be able to stand proud at any central banker get togethers.
Production in the construction sector decreased by 4.3 percent in June 2020 compared with the corresponding month last year, in calendar adjusted figures.
Regular readers will understand why this is so.
At the same time, the repo rate is held unchanged at zero per cent.
But there are other areas which can be pumped up.
The framework for the asset purchases made by the Riksbank since the crisis began is being extended from SEK 300 billion to SEK 500 billion up to the end of June 2021. In September, the Riksbank will also begin purchasing corporate bonds.
You may enjoy this bit on the planned corporate bond purchases.
They shall be designed in a way that ensures a
broad and market-neutral impact on the Swedish corporate bond market and thereby on companies’ credit supply.
Market-neutral is the exact opposite of what will happen. Still I am sure the Riksbank has its reasons for supporting this area.
The real estate sector has been a driving force in the growth, representing around 45 percent of the primary volume.
Oh and as ever there are some tit bits for The Precious!
The Executive Board has further decided to cut interest rates and extend maturities on lending to banks.
The only surprise concerning money supply growth is that they have got broad money growing at pretty much the same rate as narrow money.
The annual growth rate of the narrow monetary aggregate, M1, amounted to 16.5 percent in June, a decrease of 0.3 percentage points compared with May. M1 amounted to SEK 3 564 billion in June.
The growth rate of the broad monetary aggregate, M3, amounted to 15.4 percent in June, an increase of 0.8 percentage points compared with May. M3 amounted to SEK 4 170 billion in total in June.
There are two major contexts here. The first is the way that Sweden arrived at the pandemic in terms of monetary policy. The Riksbank panicked after being called “sado monetarists” bu Paul Krugman of the New York Times. Accordingly they cut interest-rates to -0.5% in a boom and then raised them to 0% as the economy slowed. Things got more awkward as we discovered that Sweden Statistics was not entirely sure about its unemployment measure. It found a flaw and reduced the unemployment rate from 7% to 6% and then the new measure rose to 7.3%.
In that sense both bodies were grateful for the pandemic but then Sweden which is often considered a leader took its own road on lockdown. We see that this meant the economy shrank by less but then did not recover much in production or services terms in June. However of course it was still relatively better off and this will be helped by the retail sales numbers released on Monday.
The retail trade sales volume increased by 3.9 percent in June 2020 compared with the same month a year ago. Retail sales in durables increased by 5.0 percent, while retail sales in consumables (excluding Systembolaget, the state-owned chain of liquor stores) increased by 0.2 percent. These figures are working-day adjusted and in fixed prices.
Although they now seem to have some problems with the retail sales numbers too.
Meanwhile I guess the Riksbank is scanning the report of every house sale.
She says, “hello, you fool, I love you
C’mon join the joyride”
Join the joyride ( Roxette )