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Nordic Countries

The new year has comprised a range of elements - some positive and some not so encouraging. Particularly noteworthy has been the unusual state of the market, with prices exhibiting significant volatility and unpredictability.

It is normal to experience a decrease in available material in January owing to, among other factors, low temperatures, snowfalls and winter storms. However, on days when temperatures rise and some of the snow melts, there has been a noticeable uptick in intake. This suggests a potential rebound in the future and emphasizes the importance of patience until the winter season concludes. Despite positive indicators, however, concerns persist regarding the scarcity of incoming materials.

In Sweden, the combination of lower inflation and declining interest rates suggests a substantial reduction in downside risks, indicating potential for a stronger economic recovery. However, challenges such as a persistent downturn in housing construction and a weakened labour market are counterbalancing these positive factors. The manufacturing sector’s resilience is playing a pivotal role in supporting capital spending, recording a steady increase over recent years. Key contributors to this resilience include the weak krona, which has helped maintain corporate earnings, and the ongoing green transition. While the economic upturn is broadly distributed, essential drivers include the automotive, machinery and electrical products sectors. While the rate of downturn in Sweden’s inflation still lags behind that of the Eurozone, the gap has narrowed in recent months.

In Denmark, positive trends are emerging in consumption and housing, signalling an improvement in overall economic conditions. A robust labour market has propelled wages higher without posing significant concerns. Denmark’s GDP data have exhibited unusual volatility in recent quarters, driven by the combination of a boom-bust cycle in the shipping industry and a surge in pharmaceutical exports attributed to the success of Novo Nordisk’s new anti-obesity drugs. Although net exports were the primary growth driver in 2022 and 2023, there are now encouraging signs of life in private consumption. In contrast, construction activities have experienced a significant 23% decline from their 2021 peak. While house prices have seen marginal increases, construction investments continue to act as a drag on the overall economy. Conversely, there is a positive outlook for business investment, which has reached a bottom, and high-capacity utilization suggests a potential upside for machinery and equipment investments in the coming years.

In Norway, fluctuations in mainland GDP growth are expected this winter, with the oil sector’s robust demand mitigating against a steep decline. The persistence of high core inflation internationally suggests that Norges Bank is likely to defer key rate cuts until the autumn. Aggregate business sentiment remains weak, exhibiting wide variations across industries. While suppliers to the oil industry are benefitting from a cyclical upswing in petroleum capital spending, the construction and retail sectors are experiencing heightened pessimism and the service sector’s optimism is diminishing. Inflation has moderated but remains high in comparison to many other countries, sustained by a weak exchange rate contributing to the rise in core goods prices.

Finland’s export-dependent manufacturing sector has been adversely affected by subdued global demand, creating capital spending and labour market challenges and pushing the economy into a recession. Order books have reached depths comparable to those seen during the COVID crisis, making a swift recovery unlikely. Production levels are expected to decline further over the coming quarters, prompting companies to initiate cost-cutting measures and exerting pressure on both investments and the labour market. Exports are predicted to stagnate in 2024.