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Fast Comment SwedenMarch sentiment indicators and new NIER macro forecast

  1. Economic sentiment still elevated, supporting further strenghtening of business cycle in 2018
  2. Employment plans did not fall further - we will revise down our unemployment forecast
  3. The NIER remain more pessimistic than us on inflation, and revise down its Riksbank outlook
Economic sentiment still elevated, supporting further strenghtening of business cycle in 2018
While the Economic Tendency Indicator (ETI) decreased for a fourth straight month in the survey of the National Institute of Economic Research (NIER), it remains well above average (outcome 108.4, our estimate 108). That supports our GDP forecast for another good year in 2018. Consumer confidence (CCI) at 101.5 was slightly lower than we had anticipated (104). And it was not households' concerns about their personal situation that dragged down the overall number. Instead, the perception on the general economic situation in Sweden has deteriorated somewhat. Turning to Manfacturing confidence (MCI), the reading was a sideways move at 114.5 - higher than we had anticipated based on other recent data (our estimate 112). For more details, see graphs below!
Employment plans did not fall further - we will revise down our unemployment forecast
The labour market indicators in the NIER survey have cooled lately, but today's report saw a sideways movement. Hence, employment plans are still significantly positive and we will revise down our unemploymnet forecast in our next macro forecast report on the 24th of April. In the meantime, read more about why we are less positive on medium term labour market developments in this new report (Swedish only): http://research.handelsbanken.se/Macro-Research/All-Publications/publication/26734/aktuell-ekonomi
The NIER remain more pessimistic than us on inflation, and revise down its Riksbank outlook
The NIER see CPIF excl energy at 1.5 percent this year. And even if headline inflation (CPIF) is forecasted to be 1.8 percent, the NIER now expect the Riksbank to delay rate hikes until 2019. We are more optimistic on inflation, and note that indicators in the NIER survey signal above-average core inflation for the near term (see graph below). Our arguments for a positive inflation forecast are found in this article from 13 of March: http://research.handelsbanken.se/Macro-Research/All-Publications/publication/26676/macro-comment-sweden


Economic sentiment cooling once again, closing gap compared to GDP developments 


Source: Macrobond and Handelsbanken


 Relatively lagre drop in service sector sentiment


Source: Macrobond


CCI lower as households perception of Swedish economy turns less positive


Source: Macrobond



Drop in consumers' macro view driven by all three subindexes



MCI slightly above our estimate, thereby remaining relatively more positive than Manufacturing PMI 




Construction sentiment improved 



Overall employment plans stopped falling - will we avoid a deeper deterioration of labour market situation?




NIER survey monthly inflation indicators mixed, but above historical average  





Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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