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Fast Comment SwedenInflation in January

  1. Inflation lower than expected...
  2. ...but this is partly due to the change in the CPI basket composition
  3. Worrying signs for future trends, mixed with positives; plenty of time for the Riksbank to digest the outcome
Inflation lower than expected...
Swedish consumer price data for January showed that CPIF inflation decreased to 1.7 percent y-o-y. This was below expectations, as our estimate, the consensus median and the most recent Riksbank forecast from its February Monetary Policy Report were all at 1.9 percent. The upbeat trend in underlying inflation was hurt by the decrease in the CPIF excluding energy. More numerical details are shown in the tables below.
...but this is partly due to the change in the CPI basket composition
The negative surprise is partly due to the effect from this year's re-weighting of the CPI basket. We had expected the effect to be negligible, but instead it dragged inflation down 0.16 percentage points.
Worrying signs for future trends, mixed with positives; plenty of time for the Riksbank to digest the outcome
Some of the disappointments are found in travel, although we were surprised on the upside by the property tax rise. Overall, it appears that there is not much to worry about in terms of underlying inflation. The negative basket effect that arose from substitution within several CPI aggregates is something we will live with this year, with the impact dampening inflation. Many indicators for underlying inflation will also be affected by the basket effect, but it is notable that the median CPI continued to trend upward gradually. While this outcome will likely mean we need to lower our inflation forecast, we will continue to monitor underlying inflation pressures thoroughly. The Riksbank will have the February and March outcomes in its hands before sitting down for the April monetary policy meeting.

Inflation disappoints


 Inflation disappoints




Inflation lower than expected




Inflation still very much boosted by services 



Among services, the core is healthy 


 CPIFXE and broadness indicator edge down, but median inflation rises




Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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