Swedish household consumption falls in December

Swedish household consumption came in quite subdued in December; however, the data for prior months were upwardly revised. On a sequential basis, household consumption dropped 0.8 percent, while it fell 1 percent on a year-on-year basis. For the whole of fourth quarter, consumption probably rose by around 0.5 percent quarterly after falling 1 percent in the third quarter, noted Nordea Bank in a research report.

However, the trend for household consumption is soft and it is increasingly difficult to blame temporary factors. The bottom line is that households have responded negatively to the new conditions caused by the shaky housing market. The factors that boosted growth before – high credit growth and rocketing house prices – have now turned into a concern.

The comparative growth advantage of the Swedish economy is probably history. The Swedish central bank is too positive about household consumption.

“Sluggish domestic demand supports our view that the next rate hike is distant”, added Nordea Bank.