Sweden Macro Signal – September 2024: Recovery In Waiting
MNI (LONDON) - The Swedish economy is still waiting for an economic recovery to take hold. Domestic consumption and investment continue to drag on growth, while the labour market has weakened further. However, with additional rate cuts on the horizon and inflation normalising, economic prospects appear favourable heading into 2025.
PDF Analysis Here: 2024_08_Sweden_Macro_Signal.pdf
- 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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