Swedish wages rise in November, economic growth likely to decelerate in 2019

Swedish wages rose in November, while the figures for the prior months were upwardly revised, particularly in the public sector. On a year-on-year basis, wages rose 2.6 percent. The adjustment in the public sector comes from revisions of wage for teachers. In the last three months, wages in the public sector rose 3 percent year-on-year, compared to 2.6 percent year-on-year before the revision was made. Nevertheless, the trend in wage growth has been indicating a bit downwards since mid-2018.

A significant explanation to the slightly slower pace in wage rises is that wage raises in the business sector have slowed down in the past months. The sector accounts for nearly 70 percent of the economy and current estimates indicate towards an average wage rise of 2.6 percent year-on-year in the initial six months of 2018. But since July 2018, wages have begun rising at a slower rate and current figures indicate towards an average rise of 2.4 percent year-on-year.

“The Swedish economy is slowing down, and our new forecasts points at a GDP growth of only 1.0 percent and 1.3 percent y/y in 2019-2020. Even though the labour market is very robust it will most likely deteriorate”, said Nordea Bank in a research report.

Moreover, the productivity growth is expected to stay subdued.

“These factors have led us to revise down our wage forecasts for 2018-2020 to 2.5 percent y/y. This means that we expect wage talks in 2019-2020 to result in pay rises of largely the same size as previously and wage drift to stay low”, added Nordea Bank.