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Macro Comment Sweden

Macro Comment Sweden — As safe as houses?

We expect upward price pressure from strong employment and income conditions to counterbalance increased supply and rising borrowing costs, resulting in a stable price trend ahead. Housing starts are likely to continue falling next year, but we think it will stabilise thereafter, given the housing shortage and strong household finances. The high number of projects up for completion in 2019 could pose risks to prices and bring further pain to smaller developers, especially given limited scope to change regional focus or switch to rental accommodation. However, the relatively low importance of smaller developers to the wider economy should mean that any fallout is contained, in our view.

Helena Bornevall, Senior Economist | hebo12@handelsbanken.se

Macro Comment Sweden — Political deadlock after inconclusive election

With almost a dead heat between the two blocs after Sunday's parliamentary elections, everything indicates that the process of forming a government will be protracted and complicated. Although the political situation looks to remain uncertain in the coming weeks, it is difficult to see this having a major impact on financial markets or the near-term macroeconomic outlook. However, it is a concern that the next government will probably not command enough support in parliament to really get to grips with some of Sweden's most pressing structural challenges.

Anders Bergvall, Senior Economist | anbe83@handelsbanken.se

Macro Comment Sweden — In defence of inflation

In the midst of an onslaught of renewed pessimism about the consumer price outlook, we once again wave the banner of a sustained positive inflation trend. Judging by questions from clients, talk among fellow analysts and commentary in the media, we would do best writing memos titled All Quiet on the Price Rise Front, Game of One-Offs - Price Hikes Stop Coming, or even Inflation and its Critics. However, after re-examining the cold, hard data, we conclude that a more positive tone is warranted and argue that inflation is still trending upward and is therefore bound to surprise many on the upside. We expect the March CPI to start confirming this, while tomorrow's February outcome will show that inflation was still muted last month.

Johan Löf, Senior Economist | jolo22@handelsbanken.se

Macro Comment Sweden — How will households react when interest rates are raised?

Today, Sweden's household debt ratio is at an all-time high, while interest rates are at an all-time low. The obvious questions arise: What will happen when interest rates are raised? How will households cope? Household margins seem to be satisfactory in terms of an ability to cope with higher interest rate costs. The main worry is over changes in household consumption and the effects on the economy that would follow. It is reassuring that household savings rates are at an all-time high; however, a risk remains of significant effects on consumption by the heavily indebted.

Helena Bornevall, Senior Economist | hebo12@handelsbanken.se