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Fast Comment SwedenSwedish inflation a lingering bright spot as dark clouds form on economy's horizon

  1. May CPI report expected to show Riksbank hit its 2 percent target, again
  2. Underlying inflation has some additional upside in the near term...
  3. ...but headline CPIF inflation is under threat from an energy price meltdown

Please see comments and graphs below:

May CPI report to show headline CPIF inflation stayed close to the Riksbank's target (release Friday, June 14). However, in this last print ahead of the next policy rate meeting, we also expect CPIF excluding energy to undershoot the Riksbank's forecast.

Still, leading indicators and our forecasting models suggest some additional upside to underlying inflation over the course of the coming year. Here illustrated by our nowcast for CPIF excluding energy, which reaches almost 2 percent around year-end.

Looking more plainly, inflation appears quite broad based. That also supports our view that the upward trend in Swedish inflation has some way further to run, despite gradually cooling growth and a worrisome global backdrop.

However, turning to headline CPIF inflation, energy prices are still in the driver's seat, and the last weeks have seen rapidly falling prices. 

At this point our nowcast exceeds the Riksbank's CPIF forecast, a potential energy price meltdown could change this in a matter of weeks. Excluding the volatile energy prices, our inflation outlook is somewhat weaker than the Riksbank's.

May CPI report details:
This year, travel prices likely plunged after the Easter holiday in April, whereas last year saw the bulk of the expensive Easter trips taking place in March, meaning May 2018 was a month of more ordinary seasonal price increases. This swing from 2018 to 2019 dampens the overall May CPIF inflation (y-o-y).


Johan Löf

Senior Economist


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