Denmark slides into recession during Q1

By Tasneem Brogger  |   2008-7-2  |     NEWSPAPER EDITION

DENMARK slid into recession in the first quarter, the first European Union economy to contract for two consecutive quarters since the global credit crunch started last year.

The economy shrank 0.6 percent, after contracting a revised 0.2 percent in the fourth quarter, Copenhagen-based Statistics Denmark said yesterday. The median estimate of four economists in a Bloomberg News survey was for growth of 0.2 percent. The economy contracted an annual 0.7 percent.

Growth is slowing worldwide as the credit squeeze sends borrowing costs higher and curbs investment, while record oil prices and soaring food costs erode consumer spending power.

Danish consumer prices are rising at the fastest pace in 18 years while property values fall, undermining household spending that accounts for half the US$340-billion economy.

"This confirms the picture of an economy that's coming to an abrupt halt," Jes Asmussen, chief economist at Handelsbanken in Copenhagen, said in a note to clients. "Economic growth this year is fading markedly and will be replaced by an economy that's completely stagnated by next year."

The contraction was led by a 1.1-percent slump in household spending from the fourth quarter, while fixed investment dropped 0.6 percent, the office said. Government expenditure shrank 1.4 percent. Exports grew 1.1 percent, exceeding import growth of 0.4 percent, the office said.