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Economic Tendency Indicator Presents Stagflation Risk

SWEDEN

Sweden's Economic Tendency Indicator for November indicated rising pricing plans in all sectors other than construction, which will make life tricky for the Riksbank. The latest Policy Decision leaned heavily on improving pricing plans to justify a hold in rates.

  • The data presents a clear stagflation risk, with domestic demand deteriorating but business still eyeing price increases. SEK has seen limited reaction to domestic data today, with EURSEK being driven by moves in the single currency as CPI data filters through.
  • The headline was 84.6 vs a revised 84.9 prior, while consumer confidence was 72.8 vs a revised 70.6 prior. Both measures remain below the 90 threshold indicating "much weaker growth than usual".
  • Consumer confidence has been below 90 for 21 consecutive months now, and while real consumer spending is unarguably weak, the confidence indicator still appears overly pessimistic. Consumer inflation expectations were 7.1% - a touch above the 7.0% seen in October.
  • Employment was seen falling in all sectors other than manufacturing.
  • Earlier today, GDP for Q3 was revised a touch lower than the flash, with all major components other than exports (driven by the exports of services) falling Q/Q. Elsewhere, retail sales for October improved vs September but the annual growth rate recorded its 18th consecutive negative rate.

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