Swedish CPIF inflation likely to have accelerated in October

Swedish CPIF inflation data for the month of October is set to be released next week. According to a Nordea Bank’s research report, the CPIF inflation is likely to have accelerated to 2.6 percent from September’s 2.5 percent. This projection is slightly higher than the central bank due to different forecast for energy prices.

The core rate, which excludes CPIF, is expected to have come in at 1.6 percent. Core inflation is likely to accelerate in the months ahead as goods inflation is witness a temporary rise. There is no “done deal”, but it should be enough to warrant a rate hike in December.

Usually, October is an uneventful month in terms of price changes. What sticks out this time is that the subdued krona is likely to be reflected in increased prices in goods. Energy prices, for once, were stable. Variable prices of electricity admittedly fell but were balanced by increased electricity grid tariffs in Stockholm. Prices of foreign travel dropped in line with the trend last year, according to the Nordea Bank’s forecast.

The central bank has solid focus on service prices, which have been on the up in recent months and risen slightly more than expected. The rise was comparatively widespread.

“We estimate that service inflation ex foreign travel decreased somewhat in October but will return to the slightly increasing trend the coming months”, stated Nordea Bank.

The fact that service inflation is accelerating only gradually is because of modest rises in wage, among other things. The latest wage outcome for August indicated that the trend of accelerating wage rises seen earlier in 2018 levelled out.

Food prices rose comparatively rapidly in the past years, owing to the subdued krona. This autumn have extraordinarily poor harvest is Sweden also appeared to have created upward pressure on prices.

“We expect that prices rose slightly in October and will increase going forward with price increases of 3-4 percent on an annual basis during the winter”, said Nordea Bank.