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Gothenburg’s booming economy continues to improve

Gothenburg’s already strong economy saw further improvement during the autumn and expectations for the spring are even more optimistic. At the same time, falling real estate prices are causing uncertainty among buyers on the property market. But major price drops are unlikely as long as the economy remains strong, according to Henrik Einarsson, head of the Establishment and Investment department at Business Region Göteborg.    

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Economic Outlook # 4 2017

Almost all indicators show that the economic boom is gaining a stronger grip on the region. Job growth is strong, unemployment is falling, vacancies are being filled, the population is steadily increasing, and travel to and from the region is increasing substantially.

These were the findings of Business Region Göteborg’s fourth economic outlook report for 2017. The report is based on official statistics from Statistics Sweden, the public employment agency Arbetsförmedlingen and Region Västra Götaland.

The economic tendency indicator for autumn 2017 was 44, where greater than 40 indicates an economic boom. This was one point higher than in the spring, but several points lower than expected. Looking ahead, the forecast for spring 2018 shows great optimism among companies with the already high pace expected to further improve (52).

The best economic outlook is among companies within IT services, where the economic tendency indicator for autumn 2017 is 81. The automotive industry, business services, and construction also posted strong results and all expect their boom state to further improve next spring.   

“These are unique periods we are experiencing in the Gothenburg region with growth across almost all sectors. What’s limiting the growth is a shortage of personnel and space to expand. Even though it is hard to find a clear sign that a dip is coming, for every day that comes, we get closer and closer to the top of the economic cycle,” says Henrik Einarsson, head of the establishment and investment department at Business Region Göteborg.   

Job growth has now been positive for 30 consecutive quarters and most new jobs continue to be created within and around construction, the automotive industry and ICT.

In October 2017, the unemployment rate was 5.6 per cent. This was the lowest among Sweden’s metropolitan regions, a position the Gothenburg region has held since mid-2015. However, unemployment remains high among certain groups, in particular, among foreign-born residents.

Above all, the prices of flats in the Gothenburg region have decreased during the past 3-6 months, but at lower rate compared to in Stockholm and Malmö. Meanwhile, the Swedish government has passed a proposal from the Financial Supervisory Authority to further sharpen the amortization requirement, which means we will probably face a period with more cautious home buyers, which may lead to falling prices.

“A major decrease isn’t likely as long as the economy remains strong. The strong wage growth and low unemployment are currently counteracting any significant drop in prices. In the longer-term, it can of course change, especially if interest rates rise at the same time,” says Henrik Einarsson.

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