Shopping boom continues unabated

Economists at Nordea bank expect consumers to keep spending with households set to save a combined total of 20 billion kronor from tax cuts.

But the bank also warns that a heated labour market may force the Riksbank to raise interest rates above the four percent mark.

In its latest economic prognosis, Nordea predicts that Sweden’s GPD will increase by 3.3 percent this year and 2.8 percent in 2008.

Open unemployment is expected to fall to 4.8 percent in 2007 and 4.5 percent next year.

“Employment growth is very strong and it is becoming increasingly difficult to fill jobs,” said Nordea’s chief economist Jörgen Appelgren.

The bank estimates underlying inflation at 0.9 percent this year and 1.3 percent in 2008.

The bank further predicts that labour market growth will lead the Riksbank to raise interest rates to 4.0 percent this autumn and 4.25 percent next year.

Households can look forward to unusually high income growth, according to Nordea’s economic report, with household consumption expected to increase by an unprecedented 3.8 percent this year.

Over the next two years households are expected to save a net total of 20 billion kronor. And the bank forecasts a major price increase for residential properties in attractive areas as a result of recent property tax reforms.

“All of the pieces of the jigsaw are in place for households wishing to indulge in shopping this year.

“The only thing on the negative side of the weighing scales is that interest rates wil increase, which will mainly affect those with large loans and variable interest rates,” said Appelgren.