GDP and Growth

GDP is defined as the market value of all finished goods and services produced within a country's borders during a given period. It is measured in three ways: the production approach, the expenditure approach and the income approach — according to the identity of the national accounts, all three should yield the same result.

In Sweden, Statistics Sweden (SCB) sets up the expenditure side as C + I + G + (X − M), where net exports (X − M) became especially important when Swedish exports in 2023 amounted to about 45 percent of GDP.

It is the difference between nominal and real GDP that determines whether growth is genuine or merely a price illusion. Nominal GDP is measured in current prices, while real GDP is adjusted with a GDP deflator that captures price increases.

In 2022 Sweden had nominal GDP growth of 6,9 percent while real growth was −0,7 percent — the difference was thus pure inflation.

The GDP gap is the concept the Riksbank uses to determine whether the economy is over- or underheated. A negative gap in 2020–2021 justified an expansionary monetary policy with a negative policy rate, while a rising positive gap in 2022 laid the groundwork for the sharp interest rate hikes.

The IMF uses the same gap in its country reports to compare business cycle positions between countries.

Statistics Sweden (SCB) publishes GDP on a fixed timetable: a quarterly flash GDP about 60 days after the quarter ends, a revised figure at day 90 and annual revisions in November. The flash figure is based on partly preliminary data and can be revised by a full percentage point — something investors must know in order not to overreact.

It is the revised quarterly figures that the Riksbank uses in its monetary policy reports.

The GDP components reveal more than the headline number. If growth is driven by household consumption, it is more sustainable than if it is driven by inventory build-up that can reverse next quarter.

If investments (I) fall while consumption rises, it is a warning of corporate skepticism about the future — exactly the pattern seen in SCB's Q4 2022 report.

For equity investors, this means that weaker GDP is not necessarily bad for the stock exchange if it leads to lower interest rates — a dynamic seen in 2019, when weak global growth combined with rising equity valuations.

The Swedish bear market of 2022, on the contrary, was deep precisely because GDP weakness came at the same time as the Riksbank raised the interest rate.