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Swedes save despite economy confidence

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Swedes save despite economy confidence
Swedes have been keeping a tight grip on their wallets, according to an industry survey. Photo: Drago Prvulovic/SCANPIX
09:57 CET+01:00
Swedes are feeling more optimistic about their personal finances, but would rather put their money in the bank than spend it at the shops, a new survey suggests.

Financial confidence is growing in the first quarter of the year, according to Swedish insurance and investment company Skandia's so called 'wallet index'.

But despite a surprise growth spurt for the economy reported in February, negative interest, record stock exchange trade, and political instability have put a damper on Swedes' willingness to spend the extra cash in their purse.

"It appears that the interest weapon which was supposed to get the ball rolling and increase consumption has not worked. We see that families prioritize savings and investment," Jeanette Hauff, Skandia behavioural economist, told Swedish news agency TT.

High income households in the city regions, earning more than 50,000 a month, are feeling the most optimistic, according to the Skandia research. By contrast, they were the ones feeling the most pessimistic in autumn 2014.

"There are many diffent indicators at play, which make the future very hard to predict at the moment. That households still feel optimistic is because many have a lot more money in their wallet thanks to the low interest," added Hauff.

The krona hit its weakest level since the financial crisis in February. It has since recuperated slightly, with 9.1706 kronor required to buy a euro on Wednesday, compared to 9.6835 kronor a month ago.

GUIDE: Weak krona is mixed blessing for expats

Sweden announced in February that it would buy 10 billion kronor ($1.18 billion) of bonds with maturities of between one and five years - a policy often considered a last-ditch attempt to revive a stagnating economy - in a radical move to stop deflation.

Prices in Sweden have been stagnant since 2012 but have yet to start falling, which could trigger a dangerous cycle where consumers hold off purchases, demand drops forcing companies to cut jobs and stifling economic growth, experts warned at the time.

On Wednesday Sweden's central bank (the Riksbank) announced it would be cutting its key interest rate, the repo, from -0.1 percent to -0.25 percent, the lowest figure in history, just over a month after a similar move brought it to negative levels for the first time.

The Riksbank said it hoped that by lowering the interest, it would help boost inflation and increase the country's money supply.

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