Danish economy is loosing it and a new recession is on the way


Tuesday, 31 May 2011
The Danish economy is losing the fight to stand and a new economic slump looms. The economy’s Gross Domestic Product is falling disgustingly, and Denmark is again heading to recession.

According to latest reports from the Danish National Accounts by Statistics Denmark on Tuesday, there is a reported continuing economic decline in the first quarter of the Danish economy. Private consumption, government consumption and investment have declined.

The Gross Domestic Product (GDP) which shows how the economy has fared in Denmark fell by 0.5 percent in the first quarter, when adjusted for inflation and seasonal movements.

It is a surprising decline compared to the development last year and especially measured against the economic development in Danish neighbours. Both the total EU and U.S. had continued economic growth in the first quarter of this year, and thus differ in the last two quarters for economic development in Denmark from developments in the EU and U.S..

In advance, it was expected among economists that growth would increase 0.5 percent in the first quarter, following a dip of 0.4 percent in the fourth quarter of last year.

But on the contrary, growth came back negative, with two quarters of negative growth, Denmark is officially back recessions. Chief economist Steen Bocian of Danske Bank talks about a surprising development for the Danish economy:
"Today's figures show a surprisingly gloomy picture of the Danish economy. Besides a decline in GDP of 0.5 percent, the figures show also a decrease in employment, "said Steen Bocian.


Other analysts believe that today's figures mean that the upswing in the Danish economy is now wavering.
On the whole, today's GDP figures may therefore be said to be a disappointment. Probably most disappointing is consumer spending which fell by 0.8 percent in the first quarter. This makes it clear true that consumption is still not lived up to its potential. Although disposable incomes are coming under pressure here in 2011 - primarily due to rising interest rates, high inflation, rising taxes and a declining wage growth - so the economy comes from two jubilees in 2009 and 2010 where the increase in disposable income was very large.

One other important factor is that the economic uncertainty continues to keep consumption in check, and the restoration of the Danish economy continues to occur at a level of reduced power.

There was a decline of 1.9 percent in demand, private consumption, government consumption and investment all declined.
The seasonally-adjusted private consumption fell by 0.8 percent in the first quarter. The drop was composed of an increase in the purchase of vehicles of 2.2 percent, a decrease in other the purchase of other goods for 1.7 percent and a decrease in consumption of services by 0.4 percent.
Public consumption continued to decline with a fall of 0.8 percent in the first quarter.
Growth in exports contributed positively to overall demand. Exports of goods and services grew by 4.3 percent in the first quarter, while imports rose by 2.1 percent.
Total gross fixed investment fell by 8.3 percent in the first quarter. Investments in housing and in software and more, continued the positive trend from the fourth quarter, while investment in construction also declined by 2.4 percent.

Investment in machinery and transport equipment fell by 23.5 percent partly due to a negative contribution from the export of a previously established drilling rig, writes Statistics Denmark in the statement.
By Team

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