Continued uncertainty but positive growth and outlook in the tech sector
On Tuesday, Almega's economic report, the services indicator, was presented, showing that growth in the services sector came to a complete halt in the first quarter and is expected to be negative in the second quarter. According to Patrick Joyce, Chief Economist at Almega, the downturn is most evident among consultants linked to industry and the construction sector, as well as in trade.
In the tech sector, on the other hand, growth is back on track after a sharp slowdown at the end of last year.
In information and communication, output in the fourth quarter of 2022 was only 0.9% higher than in the same quarter of 2021, the lowest growth rate in the sector since 2012. The first quarter of this year, however, saw a significant boost. Output was 9.9% higher than the same quarter in 2022, which was the highest growth in the sector in five quarters (see chart above based on Statistics Sweden, National Accounts). The chart shows annual output growth in information and communication (J58-J63) quarter two 2019 to quarter one 2023 and the percentage change compared with the same quarter of the previous year in constant prices.
The sector's strong performance is mainly due to growth in computer consultancy and programming services, which rose from 2.5% year-on-year in the fourth quarter of last year to 13.5% in the first quarter of this year. These industries account for nearly 60% of the sector's output.
Telecommunications also improved compared with the previous quarter. Although output fell by 2.7% year-on-year in the first quarter of this year, this was an improvement on the 10.5% year-on-year fall in the previous quarter.
Part of the growth is explained by strong exports. In the first quarter of this year, exports of information and communication services were 10% higher in real terms than in the same quarter of 2022.
Growth in computer consultancy and programming services rose from 2.5% to 13.5%
Expectations for the future are still optimistic. This is shown in the Confederation of Swedish Enterprise's Entrepreneurial Panel, which has been broken down into the tech industry. The survey shows that a majority of companies in the tech industry believe that sales volumes will increase in the coming year. The companies also believe that they need to increase their workforce in the coming year.
Businesses' outlook has increased slightly compared to the last survey conducted in January 2023. The net figures, i.e. the share of firms expecting an increase minus the share expecting a decrease in sales volumes, have increased from a 47 percentage point majority at the beginning of the year to 52 percentage points now.
Labor shortages also look set to remain high. A preponderance of 46 percentage points of firms say they will increase their workforce over the next twelve months, which is unchanged from January. However, compared with the November 2022 survey, the preponderance has decreased from 51 percentage points.
For the Swedish economy, we see that inflation is on the way down and, although the recession is expected to continue into 2025, several forecasting institutes believe that the fall need not be as great as previously estimated. The earlier pessimism among companies has also eased somewhat, which is also a positive sign.
The services indicator has been produced by Almega since 2001 to give an indication of where economic activity in the private services sector is heading in the short term. The indicator provides information for early prediction of turning points in the business cycle, both in the service sector and in the Swedish economy as a whole, as the private service sector accounts for more than half of Sweden's total production, GDP.
In the Confederation of Swedish Enterprise's Entrepreneurial Panel, around 5,000 members answer questions four times a year about employment, sales and investments as well as some current business issues. The answers to these questions are broken down into the tech industry, where just over 300 member companies have answered questions.