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Fast Comment SwedenSentiment surveys in May

  1. Economic sentiment is now merely average after a significant drop
  2. Behind the headline indicators, growth signals are deteriorating even faster
  3. Will the Swedish economy be hit by a double blow this year already?
Economic sentiment is now merely average after a significant drop
The May batch of sentiment indicators from the National Institute of Economic Research overall signal a further cooling of the booming Swedish economy. The Economic Tendency Indicator (ETI) turned out at 99.8, meaning it has now reached the historical average of 100 after roughly four years of elevated readings (our estimate: 101.5, consensus among unusually few analysts (4): 101.85).
Behind the headline indicators, growth signals are deteriorating even faster
Bear in mind that some indicators that boost overall sentiment are *level* indicators that signal a high resource utilisation in the economy, while the cooling tendency in the surveys are driven by quite substantial drops in *growth rate* indicators, such as new orders.
Will the Swedish economy be hit by a double blow this year already?
It has been expected that the manufacturing sector will be dragged down by the poor global developments. However, to also see that households are worrying even more, despite a strong labour market, is worrisome. For the time being, we keep our view of a gradual cooling-off of the economy (see graph below), but should exports come to a halt much earlier it will be a double blow to a 2019 economy already burdened by waning housing construction. That could change the outlook in a negative way. More clues tomorrow, with the release of Q1 GDP.


Will the ETI start to correlate better with GDP growth again?  


Source: Macrobond


Both the CCI and the MCI dragged down the overall ETI outcome 


Source: Macrobond


Retail sector confidence, a rare improvement in today's sentiment data 


Source: Macrobond


Employment plans, a stubbornly positive indicator which underscores that the economic climate is still booming 



Behind the drop in CCI lies a fall in the household survey micro index, triggered by renewed worries about future for household's own economy 



Looking under the hood, the MCI is no longer sending stronger signals than the manufacturing PMI 




Yet another growth indicator that dropped further was new orders 



Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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