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Fast Comment SwedenPreview of July inflation

  1. Inflation moving sideways, rejoining the Riksbank forecast path
  2. Unusual weather to cause surprises?
  3. Summer data reinforces our forecast for rising near-term inflation
Inflation moving sideways, rejoining the Riksbank forecast path
We expect the July CPI (published Friday, August 10) to show that inflation has continued to hover slightly above the Riksbank's inflation target. Our forecast of CPIF inflation at 2.2 percent also means inflation will turn out better in line with the Riksbank's forecast than last month's CPI data did (see tables and graphs below).
Unusual weather to cause surprises?
July is usually not the easiest month to forecast, with seasonal swings in many prices. Luckily, we did not face any puzzling surprises in June as clothing and shoes sales as well as holiday period travel prices developed much like we have become used to over the last few years. The question now is if any of these developments will be derailed by the extremely hot summer weather? Speaking of weather effects, energy prices are not only lifted by the poor hydropower conditions. July also saw a grid fee hike, but it was smaller than many of the ones hitting electricity prices in recent years.
Summer data reinforces our forecast for rising near-term inflation
During the summer, data outcomes have largely reinforced our forecast for a durable inflation rise. Second quarter GDP was decent, sentiment indicators improved and producer prices picked up. As we have noted before, inflation expectations are also on the rise (new data August 8). All told, we are sticking with our view that underlying inflation will rise further. That means we forecast fourth quarter CPIF excluding energy at 1.7 percent, y-o-y.


More information in tables and graphs below:

July CPIF inflation expected slightly above the Riksbank's forecast



CPIF excluding energy expected back in line with the Riksbank's forecast, after it overestimated the June outcome 




CPIF inflation to pick up further toward the end of the year 




July CPIF inflation medium difficult to forecast 



Seasonal sales have started in the pattern of the last few years 




Important leading inflation indicators stronger than normal, while boost from weakening krona still has way to go 



 We expect underlying inflation to continue its gradual rise





Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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