Danish economy has worst contraction in over half decade
Denmark’s economy shrank more than analysts feared last quarter, with preliminary numbers suggesting the country suffered its worst contraction since 2011.
Gross domestic product fell by 0.6% in the third quarter from the previous three-month period, Statistics Denmark said on Thursday.
Output was seen shrinking by 0.2%, according to a survey of analysts compiled by Bloomberg.
Quarterly growth in the second quarter was revised down to 0.6% from 0.7%, the statistics office said.
The contraction comes at a time when the Danish central bank is warning that house prices are growing at an excessive rate after about half a decade of negative policy rates.
The bank also on Wednesday said the country’s lenders need to strengthen their capitalisation as risks are building in the financial sector.
The GDP decline follows a sharp drop in inventories, which reflects companies’ efforts to keep up with demand, Danske Bank chief economist Las Olsen said in a note.
“We expect a strong rebound in the fourth quarter, but it will probably be hard to reach 2% growth for the year, with things as they are now.”
Exports fell by 1% in the quarter, while private consumption declined by 0.6%, led by a slump in vehicle purchases as Danes awaited the final outcome of lawmaker talks on cutting car taxes.
Gross investments fell by 2.1%, the office said.
The numbers were “a step in the wrong direction, but not yet grounds for concern,” Sydbank economist Soren V. Kristensen wrote in a note.
“But it’s more worrying that exports have now fallen for a third quarter in a row. That’s remarkable, given growth in most of our export markets is pretty strong.”