(Updates with yield spread narrowing in fourth paragraph.)
Dec. 5 (Bloomberg) -- Finland’s economy grew faster last quarter than the average for the 17-nation single currency bloc, which may face a recession as the sovereign-debt crisis deepens.
Finland’s third-quarter gross domestic product adjusted for seasonal variations grew 0.9 percent from the three months through June, compared with a revised 0.1 percent growth in the second quarter, Helsinki-based Statistics Finland said on its website today. In the year, GDP adjusted for working days increased 2.7 percent.
Finland’s economy is expanding at about four times the pace of the average in the euro area, which grew 0.2 percent in the three months through September as the debt crisis erodes demand, the European statistics office said Nov. 15. The Finnish government has kept its budget within the European Union’s 3 percent deficit threshold throughout the crisis and will post a 0.7 percent shortfall of GDP next year, versus a 3.4 percent gap in the euro area, the European Commission said in November.
The difference between Finnish five-year yields and borrowing costs on similar-maturity German bunds narrowed to 22 basis points today, the smallest spread since Oct. 27.
The euro area faces a recession that will reach all parts of the bloc if policy makers fail to hammer out a response to the crisis this week, European Commissioner for Economic and Monetary Affairs Olli Rehn said in an interview on Finland’s YLE TV1 last night.
Germany’s GDP grew 0.5 percent last quarter from the prior period as the Europe’s largest economy shows signs of being sucked into the region’s crisis. Finland has continued to grow faster than the rest of the euro region as consumers continued spending.
“What surprised me this year is how strongly our private consumption has grown,” Pasi Kuoppamaeki, chief economist at Sampo Bank, a unit of Danske Bank A/S, said in a phone interview today. “Our domestic markets are robust compared to the euro area average.”
Finland’s economy expanded at the fastest pace since the end of last year, growing at triple the pace indicated by preliminary data. Statistics Finland said Nov. 15 seasonally adjusted GDP rose 0.3 percent in the third quarter from the prior three months and 2.7 percent from a year earlier, adjusted for the number of working days.
Finland’s unemployment rate fell to 7 percent in October from 7.4 percent a year ago. Joblessness was 9.8 percent in May, the month when the unadjusted rate tends to peak. Consumer confidence was at 1.5 last month, near the lowest since early 2009.
“Employment has held up even as consumer confidence has waned,” Kuoppamaeki said. “That’s boosting domestic demand.”
Third-quarter growth was driven by 1.1 percent quarterly growth in private service production and 1.6 percent expansion in construction, Statistics Finland said. Private consumption added 0.5 percent from the prior period. Manufacturing fell 0.6 percent in the quarter and electronics shrank 6.9 percent from the prior period.
Slowing exports are probably a sign Finland’s economy is losing steam, Kuoppamaeki said. The country may even face a “technical recession” next year, meaning a couple of quarters of “slight” contraction, he said.
--Editors: Tasneem Brogger, Christian Wienberg.
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