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INFLATION

Lower food prices to give consumer boost

Hard-pressed Swedish consumers are set to benefit from lower prices for basic food items such as bread and milk in 2009, retailers forecast. The falling Swedish krona could make imported items more expensive however.

World market prices for grains such as wheat have dropped during the autumn. So far the fall has not resulted in lower food prices, but retailers Axfood, Ica and Coop hope that consumers will feel the effects in their pockets in 2009.

“Several factors indicate that there is scope for us to cut some of our prices, but we have not yet seen the effects. We are in the process of negotiating with producers. But there is always a delay and it is a slow process,” said Ingmar Kroon at Axfood to news agency TT.

According to Tomas Svaton at retail sector organization Svensk Dagligvaruhandel, it is always harder to cut prices than to raise them. But he believes that that cuts can be expected in 2009, especially for grains, dairy products and Swedish meat.

“Meat prices are also tied to grain prices as they are linked with animal feed,” said Ingmar Kroon.

Lower oil prices, which affect both transports and the production of many provisions, are also expected to shine through in lower prices.

But the future is not as bright for those buying imported goods. These could in fact rise in price as the Swedish krona has declined in value against the euro during the autumn. Goods imported from EU partner countries, such as chemical products, fruit and vegetables, can become more expensive.

The Swedish Retail Institute (HUI) forecasts that food prices will rise on average by 2 percent in 2009. This represents a significant decline on the 7 percent rise experienced in 2008.

“It is very difficult to issue a forecast due to everything that is happening at the moment and price projections are the hardest of all. But we have developed an estimate and believe that the rate of price rises is set to decline.” said Jessica Lindblom at HUI.

INFLATION

Swedish inflation climbs in July

Sweden's inflation rate rose at a higher clip in July than in the previous month, partly due to rising mortgage interest costs, although consumer prices remained flat.

Swedish inflation rose to 3.3 percent in July on a 12-month basis, up from 3.1 percent in June, official data showed Thursday.

Compared with June, July consumer prices were flat, Statistics Sweden (SCB) said in a statement.

It said higher prices reflected a 3.0-percent hike in interest costs for owner occupied housing, a 5.9-percent jump in prices for package holidays, as well as higher costs for fuel and food and non-alcoholic beverages.

These increases were offset by “seasonally normal price decreases for clothing and footwear, with prices falling seven percent, and lower prices for electricity, it said.

According to the European Union’s Harmonised Index of Consumer Prices (HIPC), inflation in Sweden was 1.6 percent in July compared with a year earlier, remaining well below the 2.5 percent inflation rate seen in the neighbouring eurozone last month.

Sweden’s central bank has raised its key interest rate seven times since July 2010, pushing it from 0.25 percent to 2.0 percent, in a bid to stabilise inflation close to its target of 2.0 percent.

The Riksbank has said it plans to continue raising rates on the back of Sweden’s strong economy, which is considered among Europe’s most robust with growth this year forecast at 4.4 percent.

However, economists have in recent days said they expect the bank will backtrack and leave rates unchanged at its next meeting in September due to growing fears of a new global financial crisis.

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