Confidence in economy hits record low

A major index measuring sentiment about the Swedish economy continued to fall in November, reaching its lowest level since measurements began in 1996.

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The Economic Tendency Indicator, produced by the National Institute of Economic Research (NIER – Konjunkturinstitutet), fell nearly eight points to 71.6, another sign of weakness in the Swedish economy.

All sectors of the business sector had a negative impact on the Indicator’s November reading, with the manufacturing industry, the retail trade, and the service sector showing the sharpest drops.

Construction activity also deteriorated considerably, with the confidence indicator falling a full 26 points in November.

The only part of the economy to give the index any lift was a modest 0.2 point rise coming from household sector.

According to the institute, the current financial crisis and associated economic slowdown are having an increasingly “deep and broad impact on the Swedish business sector”.

“Expectations are pessimistic and employment is expected to fall across the board in the next few months,” said NIER in a statement.

Around 30 percent of Swedish companies report that having more difficulty than normal financing their operations. Of these, just over 40 percent single out tougher conditions for loans from banks as the main source of their financing challenges.

More than half of the companies surveyed also expect to be forced to carry out workforce reductions in the next 12 months, with the construction industry expected to be especially hard hit.

On the consumer side, sentiment hasn’t changed much since the previous month, but remains much gloomier than normal.

In particular, households are worried about their personal finances and the current situation in the Swedish economy, according to NIER, but are somewhat less pessimistic about developments over the next 12 months.

Households are also more fearful of losing their job, with 18 percent believing their chance of becoming unemployed has gone up in the last month.

According to NIER, households’ one-year inflation expectations have dropped to 1.9 percent in November from 2.5 percent in the previous month. Those surveyed reckoned current inflation at 3.8 percent.