Swedish prices deflate due to cheap vacations

Swedish prices deflate due to cheap vacations
Cheaper holiday packages sent Sweden’s consumer prices sliding further in August, according to new statistics released on Thursday.

This was the fifth month running of falling consumer prices in Sweden. Statistics Sweden, which published the data, said the main reason for the drop was an 8.2 percent fall in the cost of package holidays.

Swedish prices fell by 0.8 percent on a 12-month basis in August, Statistics Sweden said in a statement, after dropping by 0.9 percent in July.

The statistics office also said from July to August, prices increased by 0.2 percent.

The Swedish economy was hit by consecutive months of rising prices last year, peaking at a 4.4 percent increase in September.

Deflation can hit economic growth because it reduces businesses profits and discourages investment.

It also leads consumers to put off buying goods in the hope that prices will continue to fall.

Sweden’s central bank forecasts that prices will drop 0.3 percent this year and rise by 1.2 percent in 2010.

In Norway, inflation in August slowed to 1.9 percent, compared to 2.2 percent the previous month.

Statistics Norway said a drop in the cost of electricity bills was one of the key drivers behind the fall in consumer prices.

But core inflation, excluding energy and tax variations and the measure used by the central bank in setting its monetary policy, increased from 2.3 percent in July to 2.5 percent.

In Denmark, consumer prices rose 1.1 percent on a 12-month basis owing to a rise in the cost of clothing and transport in August, after a rise of 1.0 percent in July, according to data from the official Danish statistics agency.

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