Danish economy unexpectedly contracts as exports decline
2014-08-29 11:29:21
Denmark’s economy unexpectedly contracted in the second quarter as exports and investments declined.
Gross domestic product fell 0.3 percent, after growing a revised 0.6 percent in the three months through March, Copenhagen-based Statistics Denmark said today, citing preliminary data. Growth was seen at 0.3 percent in a survey of five economists by Bloomberg. The economy shrank an annual 0.1 percent.
Denmark is pushing its government spending to the limit of what’s allowed by budget rules to a support a recovery in Scandinavia’s weakest economy. Growth in the euro region has stalled as its three-largest economies weakened, led by a contraction in Germany amid concern over turmoil in Ukraine.
“Exports slowed in the second quarter tracking the slowdown in our biggest export markets,” Jan Stoerup Nielsen, a Copenhagen-based senior economist at Nordea Bank AB (NDA), said in a comment ahead of the report. “Considering what’s happening elsewhere it’s natural that Denmark slows down too.”
Consumer spending rose 0.3 percent in the quarter while exports slid 1.6 percent from the previous three month.
Difficult Forecast
Denmark is struggling emerging from the fallout of a 2008 burst housing bubble that triggered a community banking crisis and undermined household sentiment. A report this month showed consumer confidence rose to its highest since 2007. Private spending accounts for about half Denmark’s $350 billion economy.
“The second quarter is crucial as it locks in base effects for the rest of the year,” Nordea’s Nielsen said. “GDP coming in below 0.2 percent for the quarter would make it very difficult for the government to meet its forecast.”
The Economy Ministry said this week that it’s sticking to growth forecasts for 2014 and 2015, predicting an expansion of 1.4 percent this year and 2 percent next year.
Prime Minister Helle Thorning-Schmidt has pledged to promote stable finances to defend the AAA credit rating while stimulating the economy as much as possible within the constraints of a 3 percent budget deficit cap set by the European Union. Denmark will stretch its 2015 budget to match that and could breach it if growth misses estimates, Nordea has warned.
Investments fell 1.1 percent in the second quarter, the statistics office said today. Inventories added 0.2 percentage point to growth.