More strength for Q1 retail sales
Retail sales in March increased by 0.2/4.5 percent m-o-m/y-o-y, a bit more than expectations. The consensus forecast was -0.3/3.4 percent m-o-m/y-o-y and our estimate was -0.2/3.5 percent m-o-m/y-o-y.
Strong trend for durables lifting retail sector
Following the strong improvement in February, the March reading shows another increase, yet small, but the y-o-y growth rate is really ticking upward. This is not so unexpected, as the first half of 2011 held a clear slowdown, although somewhat erratic. Looking at the 3-months moving average, the growth rate in March 2012 (i.e. Q1) is actually the highest since January 2011. Driver to the swings in sales is, as most often, the durables segment. In March, growth in sales of durables was 6.5 percent (y-o-y). If the improved consumer confidence remains, the path ahead could look relatively decent compared to the weak 2011. The currently strong trend for durables, taking off after last summers' weakness, is not expected to remain as steep as it has been, but our outlook on total retail sales is still that it will increase throughout 2012, mainly due to decent durables sales.
Possible upsides to Swedish outlook
Going through events and developments since the beginning of the year, we think it is far from evident how much the demand increase will hold in 2012 . The improved consumer sentiment lately likely depends on several factors, but perhaps it is the stock market that has the most obvious influence. So, given what is left to do in Europe, here's a clear candidate for downside risk. However, this should most likely set temporary dents in household consumption, given our macro forecast (published today - please have a read!), as we do not expect any financial meltdown. In total, there are several positives that will cushion Swedish domestic conditions, we believe. Softer monetary policy and eventually some relief in mortgage interest rates is our forecast. In total, the outlook for household income looks decent actually. Also, the worries on the housing market seem to have abated and we expect a flattish trend for house prices in 2012 - a kind of "sobering up". What's more is that recently published macro releases could challenge our current forecast a bit. Especially, the strong March employment figure, which in combination with strong barometers from the NIER perhaps provides an argument for a slower (than forecast) increase in unemployment. We feel rather confident that the LFS (Labour Force Survey) gave some outliers for March data, but all-in-all, the employment path in Q1 and Q2 could come out slightly higher than we have just forecast. Job opportunities will of course be crucial for consumer sentiment and retail sales.