Transaction (OMT) sovereign bond-purchasingprogramme in September, the crisis entered a less acutestage. Yields on Spanish and Italian government debthave fallen. We also anticipate that Greece will finallyreceive the next instalment in its bail-out package eventhough its negotiations with the EU/ECB/IMF troika arestill dragging on. Looking further ahead, however,Greece’s future in the euro zone is very uncertain.
…BUT MOST ECONOMIC INDICATORS HAVERECENTLY CONTINUED TO WEAKEN.
Recentpurchasing managers’ index (PMI) and economicsentiment indicator (ESI) readings nevertheless pointtowards a decline in GDP during the third quarter. Butthese indicators have been overly pessimistic aboutgrowth in recent quarters. The latest final hard dataprovide a brighter picture. While the labour marketindeed continues to deteriorate, this trend is in line withexpectations. Exports are still increasing at a decentpace, and any negative impact from the latest euroappreciation is not yet visible. Industrial production hasremained resilient, providing an upside surprise inAugust, with retail sales also surpassing expectations.The tough fiscal austerity measures now beingimplemented in many euro zone countries, along withinflation well above the ECB’s target, neverthelesscontinue to restrain consumption. Uncertainty about theeuro zone will continue to contribute to caution amongboth households and businesses. Companies are holdingoff on capital spending while awaiting a more permanentsolution to the euro zone crisis. Overall, this means thateconomic growth will remain very subdued during 2013and 2014. Germany, whose economy looks set to avoidrecession but remain weak, will provide some support togrowth.
CONTINUED CHINESE SLOWDOWN DURING THETHIRD QUARTER.
China’s economic growth rate hasslowed for the seventh consecutive quarter, but so farthe policy response to this cooling trend from Chineseauthorities has been very limited. The reason is probablythat the big leadership shift expected this November hasled to more cautious economic policies. The rebound ineconomic activity expected during the second half of 2012 hasthus not materialised. Compared to the August issue of
, we have revised our 2012 GDP forecast for Chinasomewhat further downward to 7.7%, but there are positivesignals that reinforce our assessment that China can avoid ahard landing. The PMI has stopped weakening, and consumerconfidence has shown some improvement. Exports weresurprisingly strong in September, although a weak importtrend points towards the continued absence of any clearimprovement in domestic demand.
INDIA UNVEILED NEW ECONOMIC POLICY REFORMS INMID-SEPTEMBER.
These proposed reforms are a step in theright direction but are not far-reaching enough to change thepicture of an Indian economy that is grappling with majorstructural problems. Both domestic demand and exportremain weak, and the economic growth rate is now lower thanduring the 2008-2009 financial crisis. We expect India’s GDPto grow by a weak 5.5% this year, a downward revision ofthree tenths of a point compared to August. Because of ourdownward revisions for China and India, we now expect GDPgrowth in the emerging market sphere to reach 4.9% in 2012,compared our 5.0% forecast in August.
GDP growth, Nordic countries
Year-on-year percentage change (brackets: August
2011 2012 2013 2014
Sweden 3.9 0.8 (1.3) 1.5 (1.5) 2.5 (2.5)Norway 1.4 3.4 (3.7) 2.6 (2.7) 2.2 (2.3)Denmark 1.0 0.5 (0.5) 1.4 (1.4) 1.7 (1.7)Finland 2.7 0.3 (0.6) 1.3 (1.6) 2.0 (2.0)
Nordic countries 2.4 1.5 (1.7) 1.8 (1.9) 2.2 (2.2)
Source: OECD, SEB
THE OUTLOOK FOR THE NORDIC ECONOMIES HASWEAKENED SOMEWHAT IN RECENT MONTHS.
This isespecially true of
, where we have lowered our GDPforecast for 2012 from 1.3% to 0.8%. The downturn inSwedish manufacturing indicators has accelerated, partly dueto the strong krona. Signs of weakening in the labour marketare now also increasingly evident. Growth prospects in
have declined slightly as well, and we are adjustedour 2012 GDP forecast downward from 3.7 to 3.4%. Norwaystill stands out, however, with GDP growth that is far higherthan other Nordic and Western European countries. In
, the economy is hampered by listless externaldemand, and we have lowered our GDP growth forecast. Wehave not changed our forecasts for
, where weexpect GDP growth to reach 0.5% in 2012. Danishunemployment is climbing, and private consumption growthremains weak.
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