Sweden: GDP falls in Q1
Q1 sees economy shrink sequentially for the first time in a year: According to the statistical office’s preliminary estimate, the economy shrank 0.2% in seasonally adjusted quarter-on-quarter terms in the first quarter of 2026, down from the prior quarter’s 0.4% expansion. Q1’s reading was the joint-lowest in nearly two years, and fell short of market expectations.
In annual terms, seasonally adjusted GDP growth held steady at Q4’s 1.9%.
Industrial production weighs on GDP: A full breakdown of the Q1 print will not be released until 29 May. Monthly data shows that industrial production declined from January through March; moreover, retail sales expanded at a slower pace in Q1 compared to the previous quarter, suggesting more-tepid private spending, and merchandise exports fell in February–March, boding poorly for net trade.
Economy seen recovering accelerating ahead: Looking ahead, our Consensus is for GDP to rebound in Q2, before broadly stabilizing in the remainder of the year. Looking at 2026 as a whole, economic growth is projected to reach a five-year high, supported by stronger domestic demand.
Private spending growth will benefit from increased purchasing power amid lower inflation and government subsidies; fixed investment growth will be supported by higher public spending on defense, the energy transition and AI.
On the other hand, growth in exports is likely to decelerate, reflecting weaker demand from key Swedish export markets and higher U.S. tariffs. The potential for higher U.S. levies on cars and trucks could further weigh on the external sector. Economic momentum in top trading partners, including Germany and Norway, will be crucial to monitor, while a protracted conflict in the Middle East represents a notable downside risk.