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ECONOMY

Inflation rate dips in Sweden for first time in seven months

The inflation rate in Sweden fell in July for the first time in seven months, according to official data from Statistics Sweden (SCB), indicating that rate rises may be having an impact on rising prices.

Inflation rate dips in Sweden for first time in seven months
Photo: Stefan Jerrevång/TT

“Lower prices for electricity and fuel contributed to the inflation rate sinking for the first time since January,” said Carl Mårtensson, a price statistician at the agency, in a press release.

The official inflation rate for July this year was 8 percent, down from 8.5 percent in June, and below the consensus estimate of economists at 8.3 percent.

The fall was almost exclusively the result of falling prices for electricity and fuel, with the price of electricity falling by 8.3 percent month on month and the price of petrol and diesel falling 5.6 percent. Excluding energy prices, the inflation rate rose to 6.6 percent from 6.1 percent in June. 

Olle Holmgren, Chief Strategist at Sweden’s SEB Bank said that while inflation pressure remained high, the numbers were cause for hope. 

“Inflation pressures remains high, but the composition of price changes gives some hope that the strong upward trend could be losing some steam,” he wrote in a comment

He noted that the fall in fuel and electricity prices had been offset by an “extremely strong upturn in food prices”, 13.5 percent year on year. 

Alexandra Stråberg, chief economist at the Länsförsäkringar insurance company, however, said that she did not think that the dip in headline inflation meant that the risk of rising prices was over. 

“Unfortunately, it probably hasn’t turned the corner yet,” she told TT. “This is only a short pause.” 

In the chart below from SCB’s press release you can see how four out of the agency’s inflation indexes have dipped in July, after a year of steady rises. 

The index which excludes energy prices, however, has been rising steadily since December. 

Source: Statistics Sweden

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ECONOMY

Sweden’s union federation warns of increased layoffs after rate hike

The Swedish Trade Union Confederation (LO) has warned that the Riksbank's decision to hike its key interest rate on Tuesday risks increasing the number of people being laid off by companies.

Sweden's union federation warns of increased layoffs after rate hike

Laura Hartman, the chief economist at LO, said that the union was already seeing the number of people being laid off by their employers increase as Sweden’s economy started to enter a slow-down. 

“Unfortunately, it’s looking pretty grim and it’s not been made any better by the interest rate decision,” she said. “We are on the way into an economic slowdown, and the Swedish Public Employment Service has also said that we are on the way into a period of higher unemployment.” 

She said that the unions that are part of her confederation had already started reporting members losing their jobs. 

“We are seeing that redundancies are beginning to climb upwards. That’s the signal we’re getting from our unions. This is to do with the downturn in the business cycle, which is getting worse. We don’t have any numbers for it, but our latest forecast for June had growth of 1-2 percent.”

“That’s changed now, and some people think we are facing a negative growth.” 

READ ALSO: Sweden’s central bank announces biggest interest rate hike in 30 years

Hartman said that the rise in interest rates would hit members earning less than 30,000 kronor a month hard, at a time when they are already suffering from rising prices. 

Pontus Braunerhjelm, economics professor at KTH, said that the bank’s rate increase would “put the brakes on economic development and growth”, but he said it was important to “get rid of inflation”. 

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