Nordic Countries

After the Christmas holidays, inflows of material into scrap yards resumed very slowly but picked up in the final full week of January. There are still complaints about less incoming material but demand is still strong; indeed, it may not be a case of less material coming forward but rather a slow January that would have been typical prior to the pandemic. This raises the question of what is normal: in recent years, we have seen crazy prices and abnormally high demand and, despite inflow cooling down, this is still not normal compared to pre-pandemic days. Perhaps we are looking at the end of four years of economic drama.

With that said, the uncertainty factor remains for Nordic households and businesses affected by falling real wages, lower housing prices and tighter credit terms. With all this in common, Nordic countries are nevertheless entering the slowdown and this new year from very different starting positions.

The Finnish economy has fared relatively well so far, relying on strong domestic demand and resilient exports. Finnish industry had been exhibiting strong growth but this is changing fast: in November, industrial production fell by 2.4% year on year - the first decrease since early 2021. New orders are also in decline.

Interest rate sensitivity makes Sweden stand out and a decline in consumption is becoming more evident here. As the country’s Riksbank will probably hike its key interest rate by 50 basis points to 3% in February, there could be a further decline in consumption and investments. The Purchasing Managers’ Index suggests manufacturers began to lose ground late last year while the Swedish economy is coming under further stress and uncertainty as the krona continues to be weighed down by the Ukraine conflict and energy crisis.

The Norwegian krone has had an even shakier start and is now the weakest-performing G10 currency. But despite the cost-of-living shock facing households, Norway’s private consumption has held up surprisingly well thanks to solid job growth and large household saving buffers. As the current consumption growth is unsustainable, a delayed but steeper slowdown is expected to hit Norway as the outlook for manufacturers of traditional goods is clouded by weak foreign demand, strong cost inflation and generally high levels of uncertainty.

Denmark, on the other hand, remains resilient. With marginal GDP growth of 0.3% in the third quarter and a challenging fourth quarter with the peak in energy prices, conditions are looking brighter as a milder-than-feared energy crisis will help sustain the economy. Businesses are still struggling with the uncertainty surrounding futures and bankruptcies are as high as in 2010.