Sweden wage growth remains subdued in 2017, Riksbank likely to stay on hold in 2018

Wages in Sweden rose in the month of December and the whole of 2017. Wage growth continued to be subdued despite a strong economic growth. Wages rose 2.5 percent in the whole of 2017 and 2.6 percent year-on-year in December.

Wage increases dropped in the public sector but continue to remain at elevated levels. For the Riksbank, the business sector is more significant. Wage drift in the business sector is still non-existent, and wage rises are projected at 2.2 percent in December and 2.2 percent for the whole of 2017.

Moreover, companies’ employment pans fell in all sectors. Labor shortages are still at record highs, but they also fell in the fourth quarter 2017. Wage expectations continue to be at weak levels, which would be a drag on wage growth in 2018, noted Nordea Bank in a research report.

“We see total wage increases of 2.5 percent for 2017, and revise down our forecast for 2018 to 2.7 percent and 2.9 percent in 2019. The main upside risks are higher inflation readings in 2017, and higher German wages. All in all, risks are fairly balanced in our forecast”, added Nordea Bank.

During its February meeting, the Riksbank revised their wage forecast to 2.5 percent in 2017. The minutes also showed that weak wage growth is a huge worry for the board and the current rate path. The figures released today bolster the view that the central bank would remain on hold in 2018, said Nordea Bank.

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