February Business Survey Supports Earlier Rate Cuts

The Riksbank's February '24 Business Survey supports the idea of earlier cuts to the policy rate. Analysts are currently split between May/June for the start of the easing cycle.

• SEK has looked through the release, but the details will be encouraging to the Riksbank re: the fight against inflation.
• The survey notes that consumer facing businesses, particularly in the retail sector, are lowering selling prices due to "fierce competition for household spending power".
• On the other hand, those that sell goods/services to other businesses "are instead planning to continue passing on their increased costs to customers by raising their selling prices, provided that demand does not weaken further".
• We would place more weight on the former, which supports the view of further moderations in CPI readings in the coming months.
• Additionally, respondents "believe they will not need to adjust prices as often" as the previous 2 years.
• The risk of a shift in price setting behaviour during high inflation periods has become a familiar Riksbank concern in recent months. This will placate some of that worry.
• On the labour market, further staff reductions were seen but these were expected to be "minor adjustments", with labour hoarding still prevalent.
• While there are hopes that the economic situation will improve, domestic demand remains weak and "large parts of the manufacturing industry are now starting to notice lower international demand".