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Fast Comment SwedenCPI December good news for the Riksbank, but what about 2019?

  1. Two full years with inflation at the Riksbank's target
  2. 2019 will start with rising underlying inflation, but not as fast as the Riksbank forecasts
  3. Clothing and travel prices are risks, but in different ways
Two full years of inflation at the Riksbank's target
We expect December CPI to show headline CPIF inflation finished 2018 at 2.2 percent, somewhat higher than 2017 ended. That will mark two full years of inflation around the Riksbank's target, starting with the 1.9 registered in December 2016. The energy price rise remains red hot and, together with services, is a main driver of CPI, despite its relatively small weight. CPIF excluding energy is forecast to to have increased by 1.5 percent y-o-y (see tables and charts).
2019 will start with rising underlying inflation, but not as fast as the Riksbank forecasts
Currently, we see inflation starting 2019 weaker than the Riksbank has forecast. But remember that January brings many uncertain effects that set the tone for the whole year. We will dig deeper into that issue ahead of our next macro forecast report, due out on January 30. Also, we think that the key impression is still that underlying inflation is likely to continue its gradual rise. One indication of this is that we forecast CPIF excluding energy to accelerate from 1.4 percent y-o-y in November 2018 to around 1.7 percent this summer. That forecast is grounded in our model forecasts using a wide array of explanatory variables, such as exchange rates and producer prices. Remember, for example, that not all of the past krona depreciation has passed through to higher consumer prices yet.
Clothing and travel prices are risks, but in different ways
December is a month with at very clear seasonal pattern, not least driven by increasing travel prices. Experience tells us that air fares and package tours can surprise, but it is usually only noise and followed by a recoil in the following month. Of more interest, perhaps, are the changes to the seasonal pattern in prices for clothing and shoes in recent years. Nowadays, price rises are normal in December, which we have factored into our estimate. A potential upside surprise might be seen as further change to the seasonal pattern and, hence, have a lasting effect on inflation.

CPI December forecasts (Bloomberg survey not final; please check our economic calendar later for updated results)  

Energy prices remained red hot in December, despite a decrease in fuel prices 

Currently, the start of 2019 looks weaker than the Riksbank forecasts 

Two factors lifting near-term inflation are food and services prices 

Upside risk? New seasonal pattern in clothing prices... 

Downside risk? Our 'nowcast' is a touch above forecast models for December outcome (but after that, roughly in line) 


Johan Löf

Senior Economist


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