High inflation in Denmark becomes main downside risk to our 2022 outlook

GDP surprised to the upside in Q4 2021 with 1.1% q/q growth, according to the flash estimate. The positive carryover effect has raised our 2022 GDP growth forecast by 0.4ppts to 3.4%. All domestic restrictions were eased at the end of January, in line with our view that despite incredibly high Covid cases, the economic hit from Omicron will be mild and short-lived.

What you will learn:

• Downside risks to growth now stem from the ongoing energy price surge and its passthrough to underlying inflationary pressures, although we still expect consumption to grow strongly this year.
• High-frequency data suggests that consumption was hurt by soaring Covid cases during winter, but the impact should be short-lived now that all restrictions have been eased.
• Labour market stress remains high, but survey data on employment expectations and new order volumes suggest that labour shortages have likely peaked, albeit at very high levels.