Swedish economic confidence falls in January, but remains elevated

The Economic Sentiment Indicator of Sweden, which covers companies and households, continued to fall in January but remains elevated. The overall economic sentiment indicator dropped from 112 to 110.2 in January, as compared with consensus expectations of 112.3. There are indications that the housing market development is hitting growth. Sentiment dropped in all major sectors, consistent with expectations.

Consumer confidence indicator remained nearly unchanged at healthy levels of 107.2. Sentiment for construction remained firm at 110.3, while short term construction plans were stable at decent levels. But longer terms plans dropped noticeably, underpinning the view of falling housing investments the coming year, noted Nordea Bank in a research report.

Manufacturing firms became less positive, with the manufacturing confidence indicator falling from 116.1 to 113.8. This shows continued but slower growth in the sector. Companies’ employment plans in the business sector continued to be high. Labor shortage dropped surprisingly.

Households’ inflation expectations dropped to 2.6 percent from 2.8 percent. Retailers’ price plans rose in January; however, it is still in line with the below-the-Riksbank inflation forecast, stated Nordea Bank. Firms’ inflation expectations continued to be low.

Overall, the ESI indicator continues to be high roughly as anticipated. There are some signs of decelerating construction investment, while consumer sentiment is resilient so far.

“We nevertheless expect consumption growth as well as GDP growth to slow”, added Nordea Bank.

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