The Swedish economy is still waiting for an economic recovery to take hold.
- Economic Activity: Q2 GDP was -0.3% Q/Q, above the flash estimate of -0.8% but still below the Riksbank’s June MPR forecast of 0.0%.
- Inflation: Conditions appear favourable for Swedish inflation to remain consistent with the 2% target going forward.
- Labour Market: The Swedish labour market has undergone further gradual rebalancing over the past 3 months.
- Monetary Policy: The Riksbank delivered its fully anticipated 25bp cut in August, bringing the policy rate to 3.50%.
Medium-Term Outlook: Analysts expect economic growth to pick up from Q2 2025 to an annual rate of over 2.5%. Such a forecast hinges on inflation remaining close to the 2% target, enabling the Riksbank to continue its (fairly aggressive) easing cycle. The combination of less restrictive monetary policy and expansionary fiscal policy should support a recovery in the Swedish labour market, which should filter into more robust consumption growth.
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