Swedish wage likely to grow 2.8 pct y/y in 2017, household consumption to rise 1.6 pct – Danske Bank

Abundance of free resources on labor market, along with disappointing sales and profit developments among corporates in Sweden, has fed through slowly into lower nominal wage growth in the wake of the financial crisis. However, domestic demand has been quite strong, absorbing most of the available labor market resources.

For instance, in construction and public services there are some signs of strain and wages are rising at a slightly more rapid pace than in other sectors. Though overall, wage growth continues to be muted and despite a longer period of low centralised wage agreements, Sweden is seeing negative wage drift frequently.

These conditions are expected to persist, as productivity continues to be subpar, noted Danske Bank in a research report. As very less sectors express a want of qualified labor and even fewer imply that lack of qualified labor is a major obstacle to growth, the Riksbank’s and many other forecasters wage growth projections continue to be quite positive, especially about solid wage drift. The recently concluded centralised wage negotiations led to wage rises below 2.5 percent year-on-year for another three years.

“We have consequently revised down our hourly wage growth forecast to 2.8 percent y/y for 2017 and to 3.0 percent y/y for 2018”, said Danske Bank.

Low hourly wage growth but decent growth in employment signifies that the wage sum would carry on expanding, albeit only slowly.