RGE Analysts

Scandinavia: First Signs of Hard Data Signaling Slowdown

The three Scandinavian countries recently published data for August manufacturing production. The message was clear: the seasonally adjusted manufacturing production index fell in all three countries. Denmark experienced a 6.6% m/m fall, while Sweden’s production volume fell by 4%, similar to the fall in the broader industrial production index. In Norway, manufacturing production decreased by 2.0% m/m in August. Production remains well below pre-crisis levels, particularly in Denmark and Sweden, which saw large drops in production during the recession.

Figure 1: Seasonally adjusted manufacturing production indices, 2000 = 100


Source: National Statistical Institutes

In Denmark, the m/m decline was the largest in over ten years; in Sweden, the seasonally adjusted manufacturing production index has not seen an equivalent drop since January 2009 and in Norway, not since March 2008. One month of data does not make a trend, but the fact that production declined in all three major Nordic economies is significant. Some commentators, looking at individual countries, said problems in seasonal adjustment could potentially explain the decline. However, it’s highly unlikely that seasonal adjustment issues explain the fall in all three countries’ data, published by their respective statistical offices.

So far, August manufacturing figures are the clearest sign of hard data indicating a slowdown in the region. This is in line with our expectation—recently outlined in our September 2010 Outlook Update for the Nordics—that the region cannot “decouple” and that growth will slow down in H2 2010.

On a separate, but related point—will the highly correlated performance of the German and Sweden manufacturing sectors hold going forward? Sweden and Germany have similar production and export structures, as reflected by the almost uniform development in their manufacturing sectors. In August, however, there was a clear divergence. If their high correlation holds true, it remains to be seen whether Sweden’s production will rebound in September to catch up with Germany’s, or whether Germany’s manufacturing output will decline in line with Sweden’s.

Figure 2: Manufacturing production indices, y/y change


Source: Eurostat, Statistics Sweden

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