Swedes save despite economy confidence
TT/The Local · 18 Mar 2015, 11:42
Published: 18 Mar 2015 09:57 GMT+01:00
Updated: 18 Mar 2015 11:42 GMT+01:00
- Small businesses seek help in cashless Sweden (17 Mar 15)
- Surprise growth spurt for Sweden's economy (27 Feb 15)
- Sweden gets record low negative interest rate (12 Feb 15)
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.
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.