Sweden’s July inflation data surpasses expectations

Sweden’s July inflation data surprised on the upside. Inflation rate according to CPIF came in at 1.4 percent year-on-year in July, as compared with consensus expectation of 1.2 percent. On a sequential basis, CPIF came in at 0.1 percent, higher than consensus projection of -0.1 percent.  CPIF stripping energy was 1.4 percent in July, 0.1 percentage point higher that the Riksbank’s forecast.

Inflation according to the consumer price index accelerated 1.1 percent year-on-year. This was more than consensus expectation of 0.8 percent. It is up from 1 percent in June. Food prices rose 1.2 percent, positively contributing 0.2 percent point to the headline figure. Also, increase in prices of international flights and package holidays along with higher restaurant prices positively contributed 0.1 percentage point.

The rise was countered by a decline in clothing price that negatively contributed 0.2 percentage point. Price of fuel also dropped in the month, subtracting 0.1 percentage point from the headline figure.

The components that unexpectedly rose in July are volatile and might drop again in the months ahead, said Nordea Bank. The higher than anticipated inflation in July makes it less likely that the Riksbank would ease further. Therefore the Swedish central bank is expected to remain on hold, added Nordea Bank.