Sweden’s Economy Expands 1.6% in Q2 as Investment Jumps and Exports Rise

Sweden’s economy grew faster than expected in the second quarter, with fresh national-accounts data showing a stronger mix of investment, exports and household spending after a weak start to the year. Statistics Sweden said gross domestic product rose 1.6% from the first quarter on a seasonally adjusted basis, a solid pickup for an economy that had struggled through much of the past two years with high borrowing costs, uneven demand and a hesitant consumer sector.

The details of the report suggested the expansion was not driven by a single narrow factor. Fixed investment posted the largest contribution to quarterly growth, exports added support as imports barely moved, and household consumption continued to recover. Inventories pulled in the other direction, which prevented an even larger gain, but the overall picture was of a broader improvement in activity across both goods-producing and service-producing parts of the economy.

The release also matters because it comes only days after Sweden’s central bank left its policy rate unchanged and said the economy had been somewhat stronger than it expected earlier in the summer. That does not settle the monetary-policy debate on its own, particularly with inflation and the labor market still in view, but it gives policymakers firmer evidence that growth conditions improved as the second quarter progressed.

Investment and net exports provided the biggest lift

According to Statistics Sweden’s full second-quarter national accounts release, gross fixed capital formation rose 3.5% from the previous quarter. The agency said the increase was mainly due to stronger spending on machinery, equipment and weapon systems. That was the single largest positive contribution on the expenditure side, adding 0.9 percentage point to quarterly GDP growth.

External demand also helped. Exports rose 1.0% in the quarter while imports increased just 0.1%, leaving net exports to contribute 0.5 percentage point to GDP growth. For an open economy such as Sweden, that mix matters. When exports rise faster than imports, foreign demand is doing more of the work in supporting headline GDP, even if the gain is not necessarily spread evenly across all sectors.

Domestic demand was not absent from the story. Household final consumption increased 0.9%, with spending on food and furnishings making the largest contribution. Public consumption rose 0.7%, including a 1.8% increase in central-government consumption and a 0.2% rise for local and regional governments. Those numbers suggest the quarter was supported by both private and public demand rather than only by trade or investment.

The main negative in the report came from inventories. Changes in inventories subtracted 0.4 percentage point from GDP growth, reflecting declines in both trade and industrial stocks. Inventory swings can be volatile from one quarter to the next, but the drag is still worth watching because it shows companies were not building stock at the same pace as final demand. Even with that headwind, Sweden still produced its strongest quarterly expansion since the 1.1% gain recorded for the fourth quarter of 2025 in the revised series.

Production, labor and income data pointed to a broader pickup

The production side of the accounts reinforced the message that growth was reasonably broad-based. Value added in the business sector increased 1.8% from the previous quarter. Within that, value added in goods-producing industries rose 1.5%, while service-producing industries increased 2.0%. Manufacturing was particularly firm, up 3.0% on the quarter, while government value added rose 0.7%.

Those sector figures matter because Sweden’s recent economic softness had often shown up in uneven industrial performance and cautious domestic demand. A quarter in which both goods and services moved higher carries more weight than one built only on a short-lived swing in a single component. It does not guarantee a straight-line recovery, but it suggests activity improved across a wider part of the economy than the headline figure alone might imply.

Labor-market indicators inside the GDP release were more moderate than the top-line growth figure. The total number of employed persons increased 0.1%, while hours worked rose 0.5% in the whole economy. In the business sector, labor productivity increased 1.3%. That combination points to output rising faster than employment, a pattern that can help margins and signal better utilization of existing labor, although it does not carry the same weight as a more pronounced rise in jobs.

The income data were also supportive. Household real disposable income increased 1.0% compared with the second quarter of 2025. That helps explain why consumer spending continued to recover even after a long period in which households were squeezed by inflation and higher financing costs. The public-sector balance remained positive as well, though less so than a year earlier: public administration posted a surplus of SEK 7.8 billion in the second quarter, down from SEK 27.5 billion in the same period of 2025.

On an annual basis, the agency said calendar-adjusted GDP was 3.3% higher than a year earlier. The non-adjusted expenditure table showed GDP at market prices up 3.8% from the second quarter of 2025. The difference reflects the distinction between calendar-adjusted and non-adjusted measures, and it is a reminder that headline year-over-year comparisons can vary depending on the treatment of working days and seasonal effects. For readers following the quarter-to-quarter trend, the 1.6% seasonally adjusted increase remains the clearest signal of momentum in the latest report.

Revisions sharpened the rebound and kept the policy focus on the Riksbank

The second-quarter release also revised earlier data, which changed the recent profile of the Swedish economy. First-quarter GDP is now estimated to have fallen 0.1% from the previous quarter, compared with a 0.2% decline in the prior publication. The fourth quarter of 2025 was revised up to 1.1% growth from 0.8%. Taken together, the revisions still leave a soft patch at the start of 2026, but they show the downturn was shallower than previously thought and the rebound into the second quarter somewhat stronger.

The new figures were also slightly stronger than the early snapshot published a month earlier in Statistics Sweden’s monthly GDP indicator. That preliminary measure had estimated second-quarter growth at 1.4% from the first quarter. Full national accounts are compiled from a wider and more detailed set of information than the indicator, so some revision was always possible. In this case, the complete figures nudged the quarter higher and strengthened the case that Sweden entered the summer with better momentum than initially reported.

That leaves the policy backdrop especially relevant. In its August 20 rate decision, the Riksbank said it was keeping the policy rate at 1.75% and still saw a probability of a rate increase later this year. The central bank said both growth and inflation had been higher than forecast in June, while also noting that labor-market developments had been somewhat weaker than expected. Thursday’s GDP report does not resolve that tension, but it does align with the Riksbank’s view that activity has been firmer than it anticipated earlier in the summer.

For investors and economists, the key question is whether this quarter marks the start of a more durable upswing or a short period flattered by strong investment and trade components. The composition of growth gives reasons for both optimism and caution. Business investment and manufacturing improved, services also expanded, and households kept spending. At the same time, inventory depletion, modest job growth and the still-sensitive rate outlook argue against assuming the recovery is fully secure.

The next official checkpoints are already scheduled. Statistics Sweden said its GDP indicator for the third quarter of 2026 will be published on Oct. 29, followed by the complete quarterly national accounts for the third quarter on Nov. 27. Those releases should show whether the second quarter’s stronger growth was the start of a sustained improvement in Sweden’s economy or a solid quarter that still needs follow-through.