Swedish producer prices rise sequentially in July

Sweden producer prices grew in sequential terms in July, reflecting higher prices on energy. Producer prices were up 0.6 percent sequentially, as compared with the drop of 0.8 percent seen in the prior month. On a year-on-year basis, producer prices grew 5.7 percent, as compared with June’s 4.8 percent rise.

Furthermore, the krona depreciated against the dollar and the euro. A weaker exchange rate usually boosts prices. Producer prices are dominated by the energy sector and especially the manufacturing industry. Nearly 75 percent of manufacturing sector’s production is for exports. More interesting for Swedish consumer price inflation is therefore import and domestic supply prices for consumption goods, which also continued to rise. Import prices on a year-on-year basis rose to 5.9 percent in July from June’s 5.4 percent.

But given recent SEK trends, import prices for consumption goods would most likely drop in the months ahead. This would in turn feed through to the consumer level, lowering inflation. This is a vital reason to expect inflation to lower next year, noted Nordea Bank in a research report.

Meanwhile, household credit growth dropped 0.1 percentage point to 7 percent year-on-year from June. The monthly growth has been steady at slightly below SEK 20 billion per month for the last two years, and would possibly stay stable at these elevated levels as long as mortgage rates are low, stated Nordea Bank.

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