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Fast Comment SwedenBusiness sector production data mixed in September

  1. Production growth somewhat below expectations, but keep calm
  2. Manufacturing and services sectors still decent; construction weighs on the total
  3. Indicators support growth ahead, in line with our GDP outlook; new report out tomorrow
Production growth somewhat below expectations, but keep calm
Today's September data for the production value index (PVI) was somewhat weaker than expected, with growth at 0.2 percent m-o-m (2.0 y-o-y; our estimates: 0.5/2.7). Was this a worrisome sign of falling business sector production and the beginning of the end for this economic boom? Not likely.
Manufacturing and services sectors still decent, while construction weighs on the total
First, July and August were revised slightly upward. Second, manufacturing and services sector growth remain healthy; it is mostly the construction sector that has weighed on outcomes over the past year. Weakness in that sector is a known unknown that will dampen the PVI (and GDP) to some extent ahead. However, in our main scenario it does not spill over to the wider economy.
Indicators support growth ahead, in line with our GDP outlook; new report out tomorrow
Tomorrow (Wednesday, November 7) we publish a new edition of our Global Macro Forecast report. We continue to expect a gradual cooling of the boom in Sweden. That means manufacturing and services production need to hold up well over the coming year. To support that view, we note that within manufacturing, indicators of new orders have not continued to dampen and production plans have picked up, despite global trade jitters. If those positives materialise, PMI will be boosted, closing some of the gap compared to the NIER survey manufacturing confidence indicator. Moreover, leading indicators in general support roughly average overall PVI growth ahead.


Worrisome deceleration tendency in overall PVI? 



Not necessarily, as it is mostly the construction sector that weighed on recent outcomes 


Source: Macrobond


Various indicators of new manufacturing orders have not continued to dampen 



In general, leading indicators support roughly average production growth ahead 



Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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