MNI INTERVIEW: Jump In Swedish Optimism May Be Overblown-NIER

Survey results showing an apparent upsurge in Swedish business optimism at the start of the second quarter may have been inflated by unusual pandemic conditions and supply shortages, the head of the barometer unit at the National Institute of Economic Research told MNI.

The NIER's Economic Tendency Indicator (ETI) rose 7.6 points to 113.4 in April, the highest since February 2011, amplifying the upbeat message from the 1.1% quarter-on-quarter rise in Q1 GDP and a gain of 2.1% in the month of March. Sweden is viewed as a bellwether because of its high level of exports to output. But Fredrik Johansson Tormod said interpreting such data was difficult and manufacturing stock levels may be distorting the headline index.

Even without a pandemic "it is difficult to compare levels over time," he said in an interview, adding that the current exceptionally high level "is not the same as if you had a value above 110 in a normal environment. We still have a pandemic with us all over the world."

Swedish companies, such as car manufacturer Volvo, are reportedly facing difficulties due to a worldwide shortage of computer chips, while Covid-related restrictions, particularly abroad, may be hitting other firms' supply chains.

VACCINE OPTIMISM

Low stock levels are treated within the ETI as a positive factor, because in normal times they would suggest manufacturers are selling what they have produced swiftly, but Johansson Tormod noted that in current circumstances "maybe their stocks are low because they can't get the goods that they need to produce."

Another key driver behind the ETI's strength is optimism about the retreat of the pandemic, rather than being indicative of current turnover levels with a Europe battling a third wave of the pandemic, he cautioned.

"Both households and business are having very high expectations of the future. We go into the summer and hopefully all the restrictions will pass away and we also have the vaccine," he said.

The retail sector saw notably strong gains on expectations of future sales rather than rises in actual turnover, he added.

The Riksbank in its latest quarterly Monetary Policy Report, published this month, projected Swedish growth of 3.7% in 2021, up from 3.0% in its previous forecast and following a fall of 2.8% in 2020. This assumed that the bulk of people in Sweden and its key trading partners will have been vaccinated towards the end of the summer, with social distancing lifted in the second half.