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The Swedish consumer price index rose 0.1 percent in June 2016 from May 2016, according to Statistics Sweden. On a year-on-year basis, Sweden’s CPI rose to 1 percent, at par with consensus projection. Electricity prices rose 46 percent in the month, contributing 0.2 percentage point to the headline figure.
Recreation and culture also contributed 0.2 percentage points, mainly because of increased prices of package holidays that rose 11.8 percent.
International flights and fuels prices rose 18.6 percent and 1.8 percent respectively, contributing 0.1 percentage point each to the headline inflation print, stated Statistics Sweden. Meanwhile, the increase was countered by a decline in prices of clothing that dropped 5.6 percent, subtracting 0.3 percentage points. Prices of vegetables also dropped 4.3 percent, negatively contracting 0.1 percentage point.
Inflation, according to CPIF, dropped slightly to 0.1 percent in June from May’s 0.2 percent, on par with consensus. On a year-on-year basis, CPIF inflation accelerated to 1.5 percent in June from May’s 1.1 percent. This was also in line with consensus projection. However, it was slightly below the Riksbank’s forecast.
Core inflation, measure by CPIF, excluding energy, was at 1. 5 percent, up from May’s 1.4 percent; however it came slightly below the central bank’s projection of 1.6 percent. This was due to lower food prices than expected.
On an annual basis, CPIF inflation is likely to trend higher in the second half of 2016 and early next year before decelerating back to 1.5 percent later in 2017, noted Nordea Bank in a research report. Accelerating domestic inflation and base effects from oil prices are expected to push CPIF inflation upwards on a year-on-year basis, while slowing imported inflation is likely to be a drag.
The Swedish central bank is concentrating more on the SEK movements that are driven by the movements in foreign central bank policy. At present, with a weaker SEK, the Riksbank is likely to remain on hold in the near future, according to Nordea Bank. Moreover, higher headline inflation is expected to push inflation expectations upwards and make the case for additional monetary policy stimuli even more uncertain, added Nordea Bank.
