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Fast Comment SwedenGDP growth picking up, but not a sigh of relief for the Riksbank as labour costs remain sluggish

  1. GDP growth accelerates from an already healthy pace
  2. The late-cyclical labour cost rise is stubbornly slow, the drag on inflation easing only gradually
  3. Retail sales off to poor start for the new year
GDP growth accelerates from an already healthy pace
National Accounts data for the fourth quarter 2017 show that growth remained brisk, at 0.9 percent q-o-q, seasonally adjusted (SA), and 3.3 percent y-o-y, calendar adjusted (CA). This was roughly in line with expectations (our estimate: 0.8 percent q-o-q SA / 3.2 percent y-o-y CA; the Riksbank: 1.0/3.4; consensus median: 1.0/3.4). This quarterly reading meant that growth for the full-year 2017 ended up at 2.7 percent y-o-y, CA, and 2.4 percent y-o-y, actual. One of the more interesting details in today's GDP data was the drop in investment growth. As anticipated, however, this was mostly caused by the erratic intellectual property and R&D component (for further details, please see tables and graphs below).
The late-cyclical labour cost rise is stubbornly slow, the drag on inflation easing only gradually
Arguably, the unit labour costs was today's most important reading in the world of the Riksbank. The outcome disappointed somewhat, with the labour costs per unit produced in the business sector rising 1.0 percent y-o-y. Thereby, the unit labour cost trend is below the Riksbank's forecast, after shaky developments in recent quarters. The overall positive trend does, however, mean the drag on inflation is gradually abating, enabling the Riksbank to see a start to repo rate hikes this autumn. Clearer support for the Riksbank's current interest rate forecast is found in the January outcome for producer prices released today (see graph below). All in all, despite today's conflicting evidence, we stick with our forecast for a first repo rate increase in September.
Retail sales off to poor start for the new year
The retail sales data for January show growth at 1.2 percent y-o-y, CA, clearly below expectations (our estimate 3.2; consensus median 2.9). Not only was the fourth quarter 2017 revised down heavily (more than we had guessed), the January growth was also slow.



GDP exactly in level with our forecast - negligible revisions to previous outcomes.

As anticipated, there was a negative recoil from last quarter's fast investment growth. 

Source: Macrobond

The investment drop largely explained by the volatile intellectual property component.

ULC not fully convincing, but not far off the two-percent trend that the Riksbank forecasts (p. 28 in the February Monetary Policy Report). Plain vanilla hourly wages picked up in December.

Producer prices for consumer goods (excl. energy) will pick up during 2018, as recent krona depreciation feeds into the y-o-y change. Domestic price increases are robust.

Source: Macrobond

Retail sales trending lower than historical correlation with several indicators, not least retail firms' confidence. 

Source: Macrobond


Johan Löf

Senior Economist


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