Swedish business sector production rises above expectations in August

Swedish business sector’s production came in above expectations in August. However, much implies that the growth will decelerate noticeably going forward, noted Nordea Bank in a research report. Business sector production rose 0.6 percent sequentially in August, whereas it rose 2.9 percent on a year-on-year basis. The uptick signifies that production has risen for two straight months.

All sectors performed better than expected. Private sector production and construction sector production rose sequentially, whereas production in the manufacturing sector remained the same. Meanwhile, order intake for the manufacturing industry fell.

The rise in business sector production is good news and lowers some downside risks for GDP growth in the third quarter. Nevertheless, the rise is most likely temporary. Indicators imply that growth in the business sector will decline going forward, and the year-on-year figure might possibly be around zero in the fourth quarter. This might not be the case for GDP growth as well.

“Moreover, unemployment will probably be around 7-7.5 percent in Q4, inflation will be too low and inflation expectations are at risk. This is why we expect the Riksbank to cut rates around the turn of the year”, added Nordea Bank.