Denmark Enters Recession on Less Spending

Denmark unexpectedly entered a recession as the economy contracted for a second quarter as consumers and the government cut spending amid rising prices and a widening budget deficit.
Gross domestic product shrank 0.5 percent in the first quarter after contracting a revised 0.2 percent at the end of 2010, Copenhagen-based Statistics Denmark said today. Economists surveyed by Bloomberg had expected growth of 0.5 percent in the first quarter, according to the average of four estimates.
“The figures are highly surprising,” Steen Bocian, an economist at Danske Bank A/S in Copenhagen, said in an e-mail. “The reason for the lower consumption is a combination of higher taxes and higher inflation, driven by raw material prices.”
Denmark exited a recession in the second quarter of 2009 after exports and increased government spending boosted the smallest of the three Scandinavian economies. Denmark’s Finance Ministry said yesterday the economy will expand by 1.7 percent this year and by 1.9 percent in 2012, lifting its growth estimate for both years by 0.2 percentage point citing a recovery in global trade.
The government said that it expects a budget deficit of 4.1 percent this year, up from 2.9 percent in 2010.
Both public and private consumption fell 0.8 percent in the first quarter compared with the previous three-month period, the agency said. Fixed investments declined 8.3 percent.
Denmark’s GDP grew 1.1 percent in the first quarter compared with a year earlier, the agency said.

From: Bloomberg