Growth in Q2 surprised on the upside, but the outlook for Sweden is weak

We have increased our 2022 GDP growth forecast for Sweden by 0.4ppts to 2.4%, as growth in Q2 surprised on the upside. However, the outlook is dominated by headwinds, including an adverse mix of lower real incomes due to high inflation and monetary policy tightening, which increases debt servicing costs and weighs on asset prices.

What you will learn:

• Europe faces a difficult winter as wholesale gas and electricity prices reach record highs, and energy rationing in key economies remains a risk.
• Despite the squeeze on real incomes, consumer spending has proved resilient, but confidence has sunk to below the level seen during the worst of the pandemic, while inflation expectations are at a record high.
• Consumer spending faces large headwinds in H2.