Gothenburg's economy improves - brighter within commerce
In three out of four sectors, companies are experiencing an improved economic situation compared with the previous quarter. Manufacturing is signalling lower volumes, but is still the strongest performing sector in the region, now along with commerce. Job growth in the Gothenburg region remains positive but is weakening. These were some of the findings in Business Region Göteborg's first Economic Outlook report of 2024.
The overall economic tendency indicator for the Gothenburg region improved from 88.2 to 93.1, suggesting a shift from a recession to a normal weak economy.
Commerce is one of the sectors that is raising expectations and the economic tendency. For most of 2023, commerce companies reported a weak situation, but in the fourth quarter the indicator reached 97.9, an increase of 8.9 points compared to the previous quarter. Increased sales volumes are expected.
“The Gothenburg region has withstood the global downturn of the last two years remarkably well, largely thanks to our industrial companies doing well internationally. The news that inflation has peaked is positive for households who have had two years with a tougher financial situation,” says Henrik Einarsson, director of business establishment and investment at Business Region Göteborg.
Export volumes weaken slightly
In the manufacturing sector, the production volume increased during the fourth quarter of 2023. At the same time, due to lower expected volumes going forward, the number of employees was reduced, which boosted profitability. The economic tendency indicator weakened to 97.2, suggesting a normal weak situation. External factors such as skills shortages and disruptions in the supply of materials and equipment have affected the sector during the year, both in terms of the number of employees and production volumes.
In the services sector, expectations strengthened slightly in the fourth quarter. Demand for services has increased and new hiring is being signalled.
The construction sector continued to struggle during the fourth quarter of last year and is the only sector still experiencing a recessional state. Three-fifths of companies are experiencing poor demand and a large proportion expect a decrease in construction volume in the first quarter of 2024.
Weak Swedish economy to turnaround in 2025
Swedish GDP growth is projected to be 0.1% in 2024 and strengthen to 2.5% in 2025.
The export weighted GDP growth of the Gothenburg’s 10 key export markets is expected to reach 1.5% this year and increase to 1.9% in 2025.
Eurozone growth is projected to be 0.6% in 2024 and improve to 1.6% in 2025.
Job growth is weakening
The Gothenburg region has had a strong labour market for several years, but we are now seeing a gradual slowdown in job growth.
The number of people employed in the region increased by 1.3% or around 7,000 people year-on-year. This was stronger than in the Stockholm and Malmö regions (+0.6% and +0.8% respectively), as well as Sweden as whole (+0.5%).
Unemployment in Gothenburg region has increased on an annual basis and is at 5.8% (+0.3%-points). It remains one percentage point under the national rate and lower than in both the Stockholm and Malmö regions.
“Our regional labour market is showing good resilience, but it is losing momentum. 2024 is expected to be a year with relatively weak economic growth and we expect that job growth will lose further momentum during the year and unemployment may increase,” says Peter Warda, senior analyst at Business Region Göteborg.
Access the report: Economic Outlook #1 2024
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