Finland's Economic Update July 2018
In the first quarter of 2018, the economy maintained its growth momentum from Q4 2017, with quarter-on-quarter growth accelerating to an over seven-year high. This was due to fixed investment surging on the back of higher private sector investment. Moreover, government consumption increased in Q1, contrasting the fall in Q4. However, although unemployment decreased, and consumer confidence hit record highs, private consumption growth decelerated in Q1 from Q4. This may have been due to high household debt levels weighing on consumer spending. The external sector, for its part, detracted from growth. Meanwhile, the economy had a weak start to Q2. In April, economic activity expanded year-on-year at the slowest pace since August 2016. The current account balance also logged a deficit for the second consecutive month in April. An expansion in private consumption should support economic growth in 2018 as unemployment dips from 2017. Moreover, accommodative monetary policy and high business confidence are seen supporting an expansion in fixed investment. However, the government’s ongoing fiscal consolidation will likely constrain government consumption growth. FocusEconomics panelists expect GDP growth of 2.7% in 2018, which is up 0.2 percentage points from last month’s forecast, and 2.2% in 2019. Harmonized inflation accelerated to 1.1% in May from 0.8% in April. Our panelists see harmonized inflation averaging 1.1% in 2018 and 1.3% in 2019.
REAL SECTOR | Economic activity growth takes a breather in April
Economic activity grew a working-day adjusted 1.8% in April compared to the same month last year, down from a significantly revised 4.0% in March (previously reported: +3.1% year-on-year) and the lowest growth rate since August 2016. This is according to the latest monthly Trend Indicator of Output released by Statistics Finland. The weaker result in April came as services production, the largest output category in Finland, registered a slower pace of growth of 2.0%, down from 2.9% in March. Moreover, secondary production, which comprises the manufacturing and construction sectors, grew 1.3% in April, down substantially from 6.3% in March. Meanwhile, primary production was solid in April, growing 8.1% (March: +2.6% yoy). A month-on-month comparison shows that economic activity on a seasonally adjusted basis contracted 0.9% in April, in contrast to the revised 0.9% expansion in March (previously reported: +0.6% month-on-month). Average year-on-year growth in economic activity ticked down to 2.9% in April from 3.0% in March.