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Fast Comment SwedenPreview of next week's macro data

  1. No distinct rebound after last month's inflation drop... yet
  2. Unemployment estimated to remain below our January forecast
  3. Inflation expectations survey due Thursday and housing price data due Wednesday
No distinct rebound after last month's inflation drop... yet (Wednesday)
February data for Swedish consumer prices is due on March 15. We expect CPIF inflation to decrease marginally y-o-y, from 1.7 percent to 1.6 percent. After January's surprisingly large negative effect from the yearly CPI basket composition changes (0.1 p.p. of our 0.2 p.p. forecast error), it is now time to redirect our focus to actual price rises. While there were price rises in February, we see few signs of a rebound closer to the Riksbank's most recent forecast (February Monetary Policy Report, 1.9 percent y-o-y). However, in March and April, we see inflation closing part of the gap, not least since air fares are pushed up by the Easter holiday effect and then the new air travel tax. Moving on to February core inflation (CPIF, excluding energy), we now expect a sideways movement at 1.5 percent y-o-y (Riksbank 1.7 percent), despite having pencilled in a rebound in domestic travel. This follows from unusually low prices for railway and flight tickets last month. We will publish a more thorough inflation analysis on Monday. For updated consensus expectations ahead of next week's data, please see our upcoming Economic Calendar.
Unemployment estimated to remain below our January forecast (Thursday)
We expect the February Labour Force Survey to confirm the tendency of the two previous months - unemployment is trending below our projected path from our January Global Macro Forecast. However, because employment indicators are more or less past their peak, we still think unemployment is not very far from reaching its bottom for the current cycle.
Watch out for inflation expectations survey (Thursday) and housing price data (Wednesday)
Thursday sees a new edition of the Prospera inflation expectations survey. March means a full quarterly report featuring not only money market players, but also purchasing managers and labour market organisations. Money market players' responses correlate with surprises in inflation outcomes, so expectations should edge down after the disappointing January CPI. More interestingly, how have other economic agents digested developments over the past quarter? We will also be looking at wage expectations, given that the Riksbank has paid extra attention to wages lately. On Wednesday, HOX data on February housing prices will be published (we will publish a separate comment on this).

 



 



Downward CPIFXE revision in line with indicator models


 


Will inflation expectations continue to fall? 





Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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