We have for the past couple of months argued for a divergent growth, inflation and central bank outlook for Sweden and Norway. See for example Nordic Outlook , which we published two weeks ago. In our Danske Bank 2018 FI Top trades, we recommended to receive SEK 1y1y vs paying NOK 5y5y both vs EUR and in this strategy we recommended to receive SEK Mar 19 FRA vs paying NOK MAR 19 FRA. In our FX 2018 Top Trades , we recommended to buy NOK/SEK and to be short EUR/NOK via a 3M bearish seagull.
Over the past week, all eyes were on the inflation data in Scandinavia. In Sweden, the three main inflation measures all came in one tenth below the Riksbank forecast, whereas core inflation in Norway rose from 1.0% in November to 1.4% in December. It was one tenth above the Norges Bank forecast and two-tenths above the consensus forecast. We still argue that inflation in Sweden is set to surprise on the downside in 2018 and delay rate hikes from the Riksbank into 2019, whereas inflation should be high enough in Norway to trigger a rate hike in late 2018.
This week is very quiet in the Scandi space. The main event will be the Swedish December HOX residential property price readings. Our indicator suggests another 2.6% fall in Stockholm flat prices, which would bring the overall decline since August 2017 to around 12%. We expect other regions in Sweden gradually to approach about the same size of price correction. We also have the real private consumption indicator in Sweden.
In Norway, we have Norges Banks lending survey . We will focus on whether banks will signal further tightening of their credit practices, as this would fuel uncertainty. However, we have not had a sniff of any plans in this direction and it seems unlikely with the housing market now beginning to show signs of stabilising.