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Fast Comment SwedenNo signs of confidence for labour market developments; June sentiment survey and May unemployment report

  1. Broad deterioration in sentiment, as manufacturing follows global climate downward
  2. Weakening leading indicators for employment
  3. Unemployment may already have bottomed out, trending above our forecast for 2019

Please see comments and graphs below!

Overall economic sentiment cools further, despite the rebound we expected in the consumer confidence indicator. It is a broad-based deterioration as all other major confidence indicators eased, in line with our expectations except when it comes to manufacturing...

Source: Macrobond

...which did not stabilise, as had been suggested by recent PMI prints. Contrary to the PMI, this was another poor showing for new orders.

Also, on the orders front, the construction sector is all of a sudden in free-fall. But remember that we have been arguing that unusually early spring weather may have meant that front-loading of some construction activity and orders this year has, overall, surprised to the upside. Maybe today was just a step toward normalisation. We will monitor developments closely.

On the back of this broad deterioration in economic climate, it is no wonder that employment plans continued to cool. Still, the NIER survey is relatively positive.

After today's higher than expected unemployment print (6.4 vs. our estimate of 6.2), it is clear that our positive unemployment forecast for 2019 is under threat.  

And even if today's plummeting employment print is likely partly noise in the statistics, the trends in both permanent and temporary jobs are weakening. Poor labour market performance has been one argument in our forecast that the Riksbank will eventually be forced to cancel its planned interest rate rises. Now, the deterioration appears to come earlier than anticipated, but on the other hand inflation is holding up well so we stick with our Riksbank call for now. But stay alert on any surprises from the Fed later today!

Source: Macrobond


Johan Löf

Senior Economist


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