The Riksbank central bank has spent the past year gradually cutting the policy rate, which, combined with a tax cut at the beginning of the year, means that household buying power has risen.
Despite this, household consumption remained unchanged in the first quarter of this year, which SEB private economist Américo Fernández believes is due to American politics.
“We saw a dip in trust as early as after the US election in November 2024, where it became clear that American foreign policy was about to change. And as we suspected, the first quarter of the year was dominated by insecurity surrounding American trade and security policy,” Fernández wrote in a press statement.
This in turn has caused increased market turbulence, cutting 501 billion kronor or 1.7 percent from Swedish household capital. Compared to a year ago, household capital has risen in value by 2.2 percent, which is well under the 7.4 percent average seen over the past decade.
Property and stocks included in this figure, with all types of assets losing value. Stocks saw the greatest fall, with international stocks particularly affected.
"Households tend to have a high exposure to global stocks in their savings and during the quarter the broader American market dropped by almost five percent. Add to that the fact that the krona strengthened against the dollar and the market fell by around 15 percent," Fernández said.
At the same time, households' combined debt grew by 34 million kronor, primarily as a result of mortgages and student loans, while consumer loans fell. Study loans in particular grew by 7.7 percent year on year, their largest increase in 24 years and well above the 2.7 percent average over the last decade.
“Household debt behaviour is strengthening the picture of a long, drawn out period of low growth,” Fernández said.
“Mortgage debt increasing at a low rate combined with shrinking consumer loans suggests that households’ appetite for risk is still low. In addition, student debt seeing the fastest annual increase in 24 years is a sign of a continued tight and cautious labour market,” he added.
Comments (1)