Swedish Economy Posts Surprise Contraction in Q1

The Swedish economy contracted by 0.2% quarter-on-quarter in the three months to March 2026, missing expectations of a 0.1% expansion and reversing a 0.5% growth in the previous period. This marks the first economic contraction in a year, weighed down by weaker activity in January and February. However, activity increased in March and is now back at a level similar to that seen at the end of last year, according to Neda Shahbazi, economist at Statistics Sweden. On an annual basis, GDP expanded by 1.6%, the softest growth in a year and below both market expectations and the previous quarter’s 2.1% increase.

The Swedish economy grew 0.5% quarter-on-quarter in Q4 2025, exceeding initial estimates of 0.2%, but slowing from a downwardly revised 0.8% growth in the previous period. Net trade weighed on GDP, as exports fell 1.2% (vs 1.1% in Q3), driven by weak goods exports, while imports remained flat (0.0% vs 0.1%). Changes in inventories also subtracted 0.5 percentage points from GDP, with a decline in industrial inventories contributing the most. Household consumption was unchanged at 0.9%. Meanwhile, government spending accelerated to 2.3% (vs 0.2%), supported by higher central government consumption, alongside fixed investments, which rose 2.9% (vs 0.8%), mainly due to machinery, equipment, and weapon systems. On a yearly basis, GDP expanded 2.1%, slowing from 2.6% in Q3 but above the flash estimate of 1.8%. For the full year 2025, the Swedish economy grew 1.5%.

The Swedish economy advanced 0.2% quarter-on-quarter in the fourth quarter of 2025, slowing from a 1.1% growth in the third quarter and coming in below market forecasts of a 0.6% expansion, preliminary data showed. Mattias Kain Wyatt, an economist at Statistics Sweden, said that the growth period observed since the second quarter largely continued through the remainder of 2025, albeit at a more modest pace. He added that figures for all four quarters showed a first preliminary estimate of full year GDP growth at 1.4% in 2025. On an annual basis, GDP rose 1.8%, easing from a 2.6% increase in the previous period and falling short of market expectations for a 2.2% growth.