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Fast Comment SwedenWeek ahead: CPI August after Riksbank surprise; GDP to make us less confident in household sector?

  1. After yesterday's Riksbank surprise, inflation prints have resurfaced as key to policy monitoring
  2. August CPI report to sit well with the Riksbank, but September could be the start of a different story
  3. GDP Q2 includes review of entire national accounts: households' economy to appear less solid than thought

The Riksbank's new CPIF forecast turned out very similar to our near-term outlook. However, behind volatile energy price projections, there are substantial differences in our respective views on underlying inflation, here illustrated by our weaker CPIFXE forecast. 

While we expect CPIF inflation to have eased marginally in August (data due Tuesday), this comes as no surprise to the Riksbank. September inflation, however, could be the first of many outcomes below the Riksbank's forecast. After the Executive Board of the Riksbank surprised yesterday by committing further to raising its policy rate around year-end, near-term inflation prints have once again become key to monitoring monetary policy developments. The board cited inflation having turned out as forecast as being an important reason it stuck with its rate rise plan, thereby playing down the previously all-important inflation outlook which should be hampered by the deteriorating real economy. 

A substantial share of important leading inflation indicators have continued to weaken lately, here sentiment survey data. However, other indicators, as well as the weak krona, signal that inflation will not collapse next year.   

In other news next week, the regular calculation of Q2 GDP will be published. We have no particular reason to expect a revision compared to the flash estimate, neither up nor down. E.g. the poor showing in the June PVI was probably already factored into the Q2 flash, despite it being released before the PVI data. Also, the GDP print sits rather well with the general cooling-off of the economy that we witness in a broad range of data (see graph). Stay alert, though, because as the past two years have shown us, the Q2 flash sometimes miscalculates GDP heavily. 

The Q2 GDP print will be published along with a general review of the national accounts, revising many of the time series. According to a Statistics Sweden report from June 13, 2015 GDP is bound to be revised up by 1 percent, while household consumption will be lifted 3 percent. That implies that the household savings ratio has been lower than previously thought, highlighting that Swedish consumers might not be as well equipped to handle the worsening economy as many have argued. Revision of historical time series could also have knock-on effects on the profile of recent GDP developments, perhaps sending new signals about the cycle.


Extra: CPI August estimate details 



Johan Löf

Senior Economist


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