Swedish inflation rises to 1.1 percent in July

Inflation climbed slightly to 1.1 percent in Sweden in July, up from 0.9 percent in June, new figures showed on Thursday.

From June to July, consumer prices dropped 0.3 percent, Statistics Sweden said in a statement.

The agency added that adjusted for the direct effect of the low interest rates, annual inflation in July stood at 1.7 percent. Sweden left its benchmark rate at a historic low level of 0.25 percent for a year before raising it to 0.5 percent on July 1st.

Statistics Sweden said that the biggest price falls were for clothing, which experienced a normal seasonal drop of 6.6 percent, and petrol, which fell 2.6 percent.

According to the European Union’s Harmonised Index of Consumer Prices (HICP), inflation in Sweden stood at 1.4 percent in July on a 12-month basis, compared to 1.6 percent in June.

From June to July, Sweden’s HICP-calculated inflation fell by 0.4 percent.

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Sweden’s growth ‘better than expected’

Sweden’s gross domestic product grew 2.6 percent in the second quarter of 2014 compared to the same period a year earlier, with the economy performing much better than previously thought.

Sweden’s growth 'better than expected'
Strong household consumption is helping Sweden's growth. Photo: Mona-Lisa Djerf/SvD/TT

The second-quarter figures from Statistics Sweden (SCB) also showed GDP up 0.7 percent compared to the first quarter.

The news will come as a boost for the Prime Minister elect, Stefan Löfven, as the agency revised its preliminary figures for the quarter upwards by 0.7 percentage points.

Financial experts have expressed concern over the “fog of uncertainty” brought on by political instability in a hung parliament.

Sweden’s currency, the krona, took a small hit in the immediate aftermath of Sunday’s election.

Election puts Sweden in 'fog of uncertainty'

“To some extent SCB had expected an increase since the preliminary figures come out so early,” Mats Dillén, director-general of the National Institute of Economic Research (NIER), told The Local.

“But it is still better than they expected and, to be honest, it’s also somewhat stronger than we had anticipated.”

Mats Dillén said the strong growth was fuelled partly by levels of household consumption that were “very strong in a European perspective.”

Investments in the housing sector were also having a positive effect, he said.

The export sector however remained sluggish, due mainly to low demand in the eurozone.

NIER was sticking to its general prognosis for the year, Dillén said, with early third-quarter figures showing that Swedish exports and a eurozone recovery were both “standing still somewhat”.

For Stefan Löfven the figures will provide some welcome impetus as he seeks to form a government but Dillén said the autumn slump meant the finance ministry would not get over-excited.  

As for next year, “most observers expect there to be more growth allied with falling unemployment,” but OECD figures showing slow growth in the eurozone meant prospects remained “quite uncertain”, said Dillén.