Swedish economic sentiment indicator falls in December, but remains elevated

The Swedish economic sentiment indicator, which covers companies and households, dropped in the month of December from a high level. The swaying housing market has not spilled over to consumer confidence. The overall report is healthy and consistent with expectations. The economic sentiment indicator fell but is still elevated at 112.5.

Consumer sentiment rose to 108.2. The construction sector also indicates resilience. Sentiment remained sound at 110.3, while the overall construction plans were stable at decent levels. But some negativity is notable for construction of buildings.

Meanwhile, manufacturing firms have become less positive, with MCI dropped from 121.9 from 116.8. This is not surprising given the record high optimism earlier in 2017. Companies’ employment plans in the business sector dropped, but continued to point towards strong employment growth.

Households’ inflation expectations rose to 2.8 percent from 2.3 percent. Retailers’ price plans were stable at modest levels.

Overall, the ESI indicator continues to be high, but the indicator has overrated actual growth the past year. Consumers do not appear to be worried about the housing market, which indicates towards continued consumption growth, at least in the near term, noted Nordea Bank in a research report.

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