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Fast Comment SwedenRetail sales plunged in May but year-to-date trend remains healthy; Riksbank policy announcement and May business sector production in week ahead

  1. After a buoyant outcome in April, retail sales plummeted in May, but 2019 so far gives some boost to GDP
  2. Riksbank on hold next week but tweaks forward guidance, as solid inflation provides breathing space
  3. Cooling off on the economy continues and in May we think manufacturing has dragged down overall production

Please see graphs and comments below:

May retail sales plunged a full 2 percent m-o-m, meaning trend growth is not accelerating as the previous data release indicated. But remember...

...that we have been talking for months about a possible roller-coaster ride in retail sales due to the Easter holiday calendar effect. Summing up, the start of 2019 is actually a bit better than 2018.  

And headline retail sector sentiment has picked up a bit, following healthy sales outcomes... 

Source: Macrobond

...but despite this OK start to 2019 and the improvement in headline sentiment, other indicators paint a bleaker picture - employment expectations are no longer stronger than normal, and the medium-term sales outlook is deteriorating 

Globally, central banks signal rate cuts. However, at its July meeting, the Riksbank will stay on hold, and also keep a near-term hike in its repo rate path, although the probability of this will be toned down. We also expect more tweaks to the Riksbank's forward guidance, with a slight flattening further out the repo rate path. Solid inflation prints recently have boosted the outlook and that is one factor allowing the Riksbank some breathing space, despite global developments. We continue to forecast no further Riksbank hikes in 2019-21.  

We expect business sector production to have stagnated in May, taking y-o-y growth back down to 2.7 percent. Most importantly, manufacturing growth should dampen after a decent showing in April - remember for example that new orders have been cooling for a long time. The Production Value Index is due Friday, July 5.


Johan Löf

Senior Economist


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