Sweden To Catch Up With Global Economy
In this week’s issue of Reading the Markets Sweden we argue that Swedish industry data – so far quite weak - are in for a strong “catch-up”. In particular, the better than expected euro-zone numbers bode well for the Swedish export oriented economy going forward. On top of that credit growth has slowly turned up and there is anecdotal evidence that the property market is again gaining traction.
Hence, we believe that the current situation, where the Swedish surprise index is lagging the euro zone is about to end, as we see a case for Sweden “resyncing” in the near term, which should add to the impression that the Swedish economy is turning around too, after the rather dismal Q2 GDP numbers. Better data coupled with our long-held view that Swedish inflation has bottomed out means that our Swedish Fixed Income analysts recommend to position for a further steepening of the Swedish money market curve.
Numbers Ahead Of Riksbank
In respect of the Riksbank, note that growth in the euro zone came in at 1.2% saar in Q2. The Riksbank’s latest forecast assumed a 0.17% saar decline in Q2. The euro zone is by far Sweden’s most important trading partner and the more positive news from the euro zone is likely to have a significant impact on the Executive Board’s perception of the economic environment. In addition, likely upward revisions of US Q2 GDP figures to more than the Riksbank’s assumption of 1.9% saar will push in the same direction
This week’s focus in Sweden is likely to on the July LFS unemployment rate. We expect the seasonally adjusted number to remain unchanged at 8.0%. This means that Q3 would start off with a reading 0.2 percentage points below the Riksbank’s forecast. If correct it would add to several other signs that economic developments in general are ahead of the Riksbank’s forecasts.
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