Gothenburg’s boom tapers off
The Gothenburg region’s booming economy faded somewhat in the autumn, shows Business Region Göteborg’s fourth and last Economic Outlook report of 2018. The labour market remains strong while housing prices have fallen and the number of redundancies has risen.
For the first time since the spring of 2016, the economic tendency indicator for the Gothenburg region has dropped below 40, the lower limit for a boom. The result, 34, which represents stronger than normal business conditions, was less than expected in last spring's forecast when an indicator of 52 was expected.
“The business cycle is currently difficult to assess. Many sectors remain in a boom state but the situation has weakened compared to last spring. It’s also important to remember that the boom that we have seen during the past few years can’t last forever, and a downturn is expected sooner or later. Many things suggest that it may be happening now. Sweden’s economy has slowed and GDP growth has fallen, largely due to reduced domestic consumption,” says Peter Warda, analyst at Business Region Göteborg.
Looking ahead, companies expect to increase their rate of production in the coming spring and the economic tendency indicator is expected to rise to 40. At the same time, the region’s important export markets expect GDP growth to weaken during 2019. In addition, we are now seeing a downturn in several indicators, including falling housing prices and an increasing number of redundancies.
“The labour market is running on all cylinders and a shortage of competence is hampering growth. We also see that the slowdown in the housing market continues, which can lead to fewer new-builds in the coming years,” says Henrik Einarsson, director of business establishment and investment at Business Region Göteborg.
Job growth remains strong
The Gothenburg region posted the strongest jobs growth and the lowest unemployment rate among Sweden’s metropolitan regions.
In the third quarter, employment in the Gothenburg region increased by 2.6% year-on-year.
The unemployment rate continues to fall and in October 2018 it was 5.5% (-0.1 percentage points on an annual basis). Around 28,400 people were unemployed or in labour market programmes in October. 61 per cent of these people were foreign-born.
If we only look at the foreign-born labour force, 15.7% of this group was unemployed in October, compared to 16.4% in the same month of the previous year.
“Many foreign-born people have taken the step from being unemployed to employed. However, with new entries of foreign-born people into the labour market, the actual reduction is not easily discerned in the statistics and so the unemployment rate remains high among this group,” says Peter Warda.
“Continued efforts will be required to further improve the group’s chances of entering the labour market at a faster rate,” he adds.