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Housing costs cause Swedish inflation spike
English house in Helsingborg's Tågaborg district in Skåne, January 2009

Housing costs cause Swedish inflation spike

Published: 13 Jan 2011 12:12 GMT+01:00
Updated: 13 Jan 2011 12:12 GMT+01:00

Inflation stood at 1.8 percent in November. Consumer prices rose by 0.7 percent from November to December, according to Statistics Sweden.

However, as a Nordea analyst pointed out, the prices for electricity, food and accommodation typically increase during the fall and winter.

"It also contributes to rising inflation expectations," said Torbjörn Isaksson, chief analyst at Nordea, on Thursday.

A new round of wage negotiations is also expected in the autumn of 2011.

"There are things for the Riksbank to think about," said Isaksson.

In the immediate course of events, he believes that inflation will retreat somewhat when electricity prices fall ahead of the spring. However, oil and food prices will continue to rise, in line with global values.

"I think we will see even higher food prices in the future," said Isaksson.

Analysts had, according to a Reuters poll, on average expected a rise in consumer prices of 0.45 percent in December and an inflation rate of 2.15 percent.

The inflation rate is the average change in consumer prices in the last 12 months.

The underlying December inflation rates according to the CPIF and CPIX measures were 2.3 percent and 2 percent. The monthly change in both cases was 0.6 percent, the agency reported.

Higher housing costs contributed to the higher inflation rate by 1.4 percentage points, higher electricity prices by 0.6 percentage points and higher interest expenses by 0.5 percentage points. Rising food prices contributed an additional 0.4 percentage points.

However, the inflation figure was somewhat lower than Swedish bank Handelsbanken's economists had expected. Electricity prices, 15 percent higher than a year ago, were behind much of the rise in inflation.

"Electricity prices rose even more than we anticipated," said Anna Råman, an economist at Handelsbanken, on Thursday.

The agency's figures supported Handelsbanken's forecast of the Riksbank's future actions.

"We believe that the Riksbank will raise interest rates at each of its meetings until late 2011," said Råman.

TT/The Local/vt (news@thelocal.se)

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Your comments about this article

12:32 January 13, 2011 by Nemesis
If you base growth in your economy on house price rises, that is what you get.

We had the same thing in Ireland a few years ago.
14:21 January 13, 2011 by hjoian
New house / apartment developments are in dire need in Sweden. The lack of housing pushes up the prices of existing stock,in a typical supply and demand situation. Mortgage lending should be based on a much higher deposit being paid by the purchaser. Its not rocket science to see what will happen if this trend continues.....
15:17 January 13, 2011 by Mib
@Nemesis

Sweden's property prices are well behind the UK market and probably equal or maybe a bit more than the Irish prices now that they have almost halved in price in some parts. Even at the peak of property prices - pre credit crunch, Sweden's prices were well below other comparable European countries.

Property prices have continued to increase after the credit crunch dip, purely due to a decent economy, which is not being dragged down by massive debts and reckless bank ledning. Also, they recently stated that banks can only lend up to 85% of a property's value. Furthermore, the amateur landlords are very few and far between in Sween due to the hosuing associations strict rules on ownership, which combined with apartment rental rules, means that the market has not been artificially pushed higher.

Ireland is the land of the builder and believed too much in the Celtic Tiger, which was all based on credit. Their housing market collapsed due to the amateur landlords borrowing too much and not being able to afford the repaymenst when borrowing became expensive. Add to the fact that the supply was much more than the demand, then as my cousin has experienced their house price dropped by 50%!! Now, lots of young Irish are leaving to find opportunities abroad...just as they did 30 years ago and more.

The UK market is robust due to demand being higher than supply, but the inability to borrwo money has meant prices have dropped. however, the landlords don't need to sell as more and more have to rent, which has increased rental prices in good locations.
17:03 January 13, 2011 by Swedesmith
Come to America, you can buy a house cheap here. I just saw a house in Detroit sell on Ebay for $2000.

Think of all the extra ammo you can buy with the savings!
14:29 January 14, 2011 by kenny8076
Swedesmith atleast on America you have the option to protect yourself...... if more people had guns things like Virginia tech and arizona wouldnt have happened............ in sweden if you own a gun and someone attacks you you cant use it......... people in Mälmo, stockholm and Gothenburg are feeling that rath............. you will NEVER get rid of guns from criminals..... so why dont people like you and me have the right to own one and protect ourselves? People kill people not guns. i owned a glock in America for 5 years, had it next to my bed, i never used it, but had someone broke into my house they would have been in some trouble

Look at the guy in China a couple years ago that killed 20+ people with a knife, in malls, on the streets ect ect...... shall we ban knives too?
17:20 January 14, 2011 by mojofat
I love how the answer to gun violence is...wait for it...more guns! Makes perfect sense. You know kenny, there is another way to look at it; which is, if guns were harder to get (especially for the mentally ill) then things like virginia tech and arizona would be much rarer than they are. But no, instead the US has an NRA that fetishizes guns and violence and blocks any little bit of regulation. Even something as common sense as the assault weapon ban.

And besides, it's people with guns kill people. Period.
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