Stockholm, Nov 30 (IANS): The Swedish economy is in recession following a contraction in the third quarter (Q3), according to official statistics.

The gross domestic product (GDP) decreased by 0.3 per cent in Q3 compared with the previous quarter and by 1.4 per cent compared with Q3 in 2022, Statistics Sweden said.

"GDP decreased for the second consecutive quarter," Xinhua news agency quoted Jessica Engdahl, head of section at Statistics Sweden's National Accounts Department, as saying in a statement.

The decrease in Q2 was 0.8 percent from Q1 and 1 per cent year-on-year, according to revised figures released by Statistics Sweden in August.

The Q3 downturn was mainly driven by changes in inventories, particularly decreased industrial inventories, and decreased household consumption.

"Household consumption expenditure was negative for the fifth consecutive quarter," Engdahl said.

According to figures released by the National Institute of Economic Research (NIER) on Wednesday, households continue to have a glum outlook on the economic future with the consumer confidence indicator for November at 72.8.

Although it had climbed by 2.2 points from October, it was still far from the 100 baseline, and NIER said in a press release that it was "very low by historical standards."

"The confidence indicator for the retail trade fell 2.9 points to 88.0 and shows much weaker sentiment than normal. The decrease was a result of negative signals about recent months' sales," NIER said in a statement.

Overall, NIER's Economic Tendency Indicator edged down in November from 84.9 to 84.6.

The contraction of the Swedish economy comes in the wake of inflation, which stood at 6.5 per cent year-on-year in October, according to Statistics Sweden.

Borrowing costs have also soared, as the current policy rate of 4 per cent is the highest since 2008.

Before the Swedish central bank started raising the policy rate in May 2022, it had remained at or below zero for over seven years.