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Fast Comment SwedenAfter substantial downward revision of GDP last week, loads of new growth indicators in the week ahead

  1. First hesitant steps toward retail sales normalisation after tough summer
  2. Economic sentiment to recoil a bit, but remain at buoyant level
  3. Net exports to turn around and boost GDP in the third quarter
First hesitant steps toward retail sales normalisation after tough summer
After a miserable couple of months, we forecast that retail sales started to rebound in August (data due Friday). Remember, however, that the extraordinary summer weather lasted well into August, so the sales normalisation will take time. We have pencilled in a pick up of 1.0 percent m-o-m, seasonally adjusted, meaning the annual change ends up at +0.5 percent, calendar adjusted. This forecast is supported by the more upbeat August retail sector confidence indicator, a similar lift in the Swedish Trade Federation's September sentiment and improved shoe sales, according to preliminary data. Because vehicle sales are depressed after the Q2 spike, and hence will hold back Q3 GDP, it is particularly interesting to see how fast retail sales can normalise.
Economic sentiment to recoil a bit, but remain at buoyant level
Last month, the headline indicators from the business and consumer surveys of the National Institute of Economic Research were positive surprises. As mentioned above, for example, the retail sector seemed to have already shaken off the poor summer sales. Digging deeper into the data we find that the headline indicators are likely too good to be true, and forecast a recoil overall in September (due Thursday). We see the Economic Tendency Indicator falling to 110, the Manufacturing Confidence Indicator to 119 and the Consumer Confidence Indicator roughly sideways at 103. That is, sentiment remains generally stronger than the average of 100, supporting the near-term GDP outlook.
Net exports to turn around and boost GDP in the third quarter
The marked downward revision of GDP that was published last week, was largely a story of more precise data for 2016, and to some extent 2017, becoming available to the national accounts. Here and now, growth in Q2 was not that heavily revised, but not least following an upward revision of imports, GDP growth was downgraded from +1.0 to +0.8 percent q-o-q. The third quarter started with faster goods exports growth and slower goods imports growth, paving the way for a net exports lift in Q3 GDP data. Will this tendency last in the August foreign trade data (due Wednesday)?


Depressing retail sales lately, but more normal food sales and some pickup in durables can give partial rebound in August


Source: Macrobond


Is manufacturing sector sentiment super strong or about average? Next clue in the NIER survey coming up this week. 



Improved net exports in July - will it last in August? 


Source: Macrobond





Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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