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Fast Comment SwedenPreview of November inflation and unemployment

  1. Energy prices to lift inflation above the Riksbank's forecast
  2. The long-standing positive trend in underlying inflation continues at a moderate pace
  3. Resurgent jobs growth points to lower unemployment in November
Energy prices to lift inflation above the Riksbank's forecast
The November data for Swedish consumer prices are due Tuesday, December 12. We expect CPIF inflation to rise marginally, from 1.8 percent to 1.9 percent y-o-y, thereby landing 0.2 percentage points above the most recent Riksbank forecast - the October Monetary Policy Report (MPR). This may appear to be a significant deviation, but on closer examination it is clear that the surprise vis-á-vis the Riksbank's projected path is caused by the notoriously volatile energy price component rather than a more upbeat trend in underlying inflation. As for CPIF excluding energy, we expect a marginal deceleration to 1.7 percent y-o-y, a reading fully in line with the Riksbank's MPR. Further numerical details are found in the tables below.
The long-standing positive trend in underlying inflation continues at a moderate pace
The positive CPIF inflation trend of the past few years has, over time, become relatively broad-based, with positive contributions from foods, energy, services and housing prices, as well as a historically small negative impact from goods price changes. The last couple of months, however, have seen faster decreases in goods prices following surprisingly low prices for clothes and shoes. The year-to-date price trend has fallen way below historical average and even further below last year's performance. This may seem odd these days with the EUR/SEK exchange rate close to 10, but remember that the krona has not weakened in the same way compared with the dollar. Instead USD/SEK is now lower than at the start of the year. Because the dollar is particularly important when it comes to imports of clothes and shoes, this strengthening of the krona against the dollar can help explain lower goods prices in the CPI. Despite this, we forecast a small upward recoil in clothes and shoes prices in November, on the back of positive indicators like rising optimism among consumers. On the other hand, to mention one upside risk to our forecast, the recent weakening of the krona against the euro may have caused prices of fruit and vegetables to spike as early as November.
Resurgent jobs growth points to lower unemployment in November
The November Labour Force Survey is released on Thursday, December 14, and we expect unemployment to decrease marginally, to 6.6 percent (seasonally adjusted). Recently, there has been a resurgence in the employment rate, after a brief period where it seemed to be flatlining, and leading indicators are now more consistently positive, following the third quarter upswing in job openings. However, due to structural challenges, we do not forecast unemployment falling much further, despite additional jobs growth in the near term. For updated consensus expectations ahead of the November inflation and labour market data, please keep an eye on our Economic Calendar over the coming days.

Little action in aggregate November inflation masks changes in the composition

Like so many times before energy prices change fast. The new, severe volatilty in package tours causes the otherwise stable overall service prices to decrease.

Broad-based rise in inflation, with services not alone in doing the heavy lifting

Inflation expected slightly above the Riksbank's forecast 

Source: Macrobond and Handelsbanken

Unemployment to decrease a little further

Source: Macrobond and Handelsbanken


Johan Löf

Senior Economist


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