Services Inflation Pushed Higher By Concert-related Categories

Swedish May inflation was higher-than-expected, with CPIF ex-energy at 3.0% Y/Y (vs 2.6% cons, 2.9% prior). This actually means that CPIF ex-energy prints 0.1pp above the Riksbank’s March MPR forecast of 2.9%. In the previous two months, the forecast error was -0.4pp.

• The probability of a June rate cut was already very small, but this data all but confirms an on-hold decision at the May 27 meeting. Main interest now is whether the Riksbank’s guidance for 2 cuts in H2 2024 will change – we don’t think there is enough evidence for that just yet.
• SEK has strengthened a touch versus the EUR and NOK, but remains comfortably within yesterday’s ranges on both crosses.
• The “one-off leisure effects” related to the Eurovision song contest and Taylor Swift concerts in Sweden appear to have had a larger impact on services inflation than expected. These effects should reverse next month.
• In May, restaurant and hotel prices rose 2.6% M/M (versus an average May increase of 1.1% M/M since 2010). On an annual basis, this component still moderated to 4.9% Y/Y (vs 5.6% prior).
• International flights also rose 17.2% M/M in May, versus an average May decrease of -7.1% M/M since 2010.
• Food prices rose 1.5% Y/Y (vs 0.7% prior) and 0.4% M/M, which also pushed underlying inflation higher.
• Headline inflation was 2.3% Y/Y (vs 2.1% cons, 2.3% prior and 2.6% in the Riksbank March MPR). As expected, electricity base effects dragged headline lower, at -10.9% Y/Y (vs -8.7% prior) and -13.3% M/M.