Sweden’s economic mood dips: survey

Swedish consumers are feeling less optimistic about the economy, with a down-turn also visible in the mood of the manufacturing industry, Sweden's National Institute for Economic Research said on Friday.

Sweden's economic mood dips: survey

“The Economic Tendency Indicator dropped almost two points from 93.8 in April to 91.9 in May and indicates that growth in the Swedish economy is much weaker than normal,” the report from NIER (Konjunkturinstitutet) stated.

“The decrease was due primarily to falls in the confidence indicators for manufacturing and consumers…The (manufacturing) industry anticipates further reductions in the workforce.”

The tendency indicator is a method used to measure how people in different segments of the economy feel about the current climate. It is considered similar to the European Commission’s Economic Sentiment Indicator (ESI) and is “based on monthly surveys of households and firms and consequently captures the sentiment among these players in the Swedish economy”.

The index weights the different segments according to their importance to the national economy – industry 40 percent, the service sector at 30 percent, construction and retail both five each, while consumers make up 20 percent of the index rating system.

“The confidence indicator for the manufacturing industry fell six points from April to May and is now ten points below the historic average. New orders have generally been weak, and dissatisfaction with order books is considerably greater than normal,” the institute said in a statement.

While confidence in the construction and engineering fields went up compared to last month, the indicator was “still well below the historic average”.

“New orders, construction output and employment have all declined in recent months. New orders are expected to pick up in the coming months, and output is expected to be largely unchanged. However, construction firms expect employment to continue to fall,” the review stated.

While retail as a whole had dropped two points, there were variations in between sectors. Swedes were still buying enough food to keep grocers performing the best among their peers, while sales of cars provided less strong figures yet its representatives said they were expecting auto sales would pick up..

In the service industry, most sectors expected demand to climb in the new few months, with certain sector hoping to employ more people – primarily restaurants, technical consultants and architects.

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Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s.