Sequential growth hits three-year high in Q4

Economy grows more than initially expected: A revised national accounts release showed that the economy ended the year with a spring in its step, expanding 0.8% on a seasonally adjusted quarter-on-quarter basis. The reading exceeded Q3’s 0.6% increase and was four times higher than the preliminary estimate of a 0.2% rise. Moreover, the result smashed market expectations and was the strongest in three years. On an annual basis, seasonally adjusted GDP grew 2.3%, improving from the previous quarter's 1.0% rise and marking the best reading since Q3 2022. Meanwhile, a revision of prior data bumped up growth for Q1–Q3; as a result, the economy expanded 0.9% overall in 2024 (2023: +0.1%).

Net trade and fixed investment underpin improved performance: Domestically, the quarterly upturn was largely due to a recovery in fixed investment, which climbed 1.8% in Q4, improving from Q3’s flat reading; the improvement came on the back of a stronger capital outlay for buildings and construction and the Riksbank’s ongoing monetary policy easing cycle. Moreover, private spending rose at a faster clip of 0.7% in Q4 (Q3: +0.2% qoq s.a.); interest rate cuts and healthy real wage growth—which outpaced inflation for the fifth straight quarter—bolstered household budgets. Less positively, government spending growth slowed to 0.1% in the three months to December from the prior quarter’s 0.4% increase. Moreover, inventories detracted 0.6 percentage points from the reading, though they tend to be volatile and are therefore not necessarily representative of the economy's underlying health. On the external front, exports of goods and services increased 0.7% on a seasonally adjusted quarterly basis in the fourth quarter, which was below the third quarter's 0.9% expansion. Meanwhile, imports of goods and services fell 0.5% in Q4 (Q3: +1.8% qoq s.a.). As a result, net trade contributed 0.6 percentage points to the overall GDP reading.

GDP growth to accelerate again in 2025: Following Q4’s stellar performance, our panelists expect the economy to be losing pace in sequential terms in Q1 and then stabilize through Q4 2025. Our Consensus is for the economy to gain momentum overall in 2025, with growth roughly doubling to around its 2015–2024 average of 2.1%: Private spending and fixed investment will benefit from a continued recovery in purchasing power and lower interest rates. Additionally, stronger demand from the EU and other Nordic economies will underpin an acceleration in exports. The strength of German industry and U.S. trade policy will be key to monitor.

Panelist insight: Nordea’s Torbjörn Isaksson commented: “All in all, GDP growth was better than expected last year. The recovery has started, but it will gradual and on a bumpy road. This in turn means that the labour market will start to recover later this year. The better than expected GDP growth is in the balance for the Riksbank keeping the policy rate steady at 2.25%. However, the key for the Riksbank is inflation trends, and the surprisingly high inflation is the main reason why we expect the Riksbank to stay on hold.”

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