Sweden’s Krona Drops after Economy Expands Slower than Expected

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The Sweden’s krona retreated after data showed that its gross domestic product grew less than estimated in the April-June quarter.

The krona fell by up to 0.5 percent versus the euro to 9.2378 at 10:31 a.m. in Stockholm. The currency also fell 0.6 percent against the U.S. dollar after Statistics Sweden reported that gross domestic product expanded 0.2 percent in the quarter through June, up from a decline of 0.1 percent in the three months through March.

Economists surveyed by Bloomberg had projected the GDP to grow 0.6 percent. On an annual basis, the economy expanded 1.9 percent, lagging analysts’ expectations of 2.4 percent.

“This is disappointing and indicates that Sweden’s economic recovery isn’t as strong as we had expected,” said Magnus Alvesson, the head of economic forecasting at Swedbank AB. “External demand is weaker and companies’ investments are delayed while consumers continue to spend.”

The Swedish economy has outperformed Europe since the financial crisis began, owing to increasing income and wealth fuelled by affordable credit. However, weak demand from the main European demand and a bullish krona has hurt exports, and resulted in the highest unemployment rate in Scandinavia.

Sweden’s unemployment rate in June increased to 9.2 percent, the most in three years. Consumer prices have also plunged over the last 5 out of 6 months on a yearly basis. The Riksbank reduced its benchmark interest rate this month by the more-than-forecasted 0.5 percentage point to 0.25 percent as part of its efforts to combat deflation.

The Swedish central bank also lowered its 2.4 percent GDP growth forecast to 2.2 percent in 2014 and 3.3 percent next year.

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