SWEDEN: Sep ETI: Sentiment Picking Up, Inflation Pressures Easing

The Swedish Economic Tendency indicator rose to a year-to-date high of 97.2 in September (vs 96.3 prior). Increases were seen in consumer confidence, alongside the retail, construction and manufacturing sectors. Services sector confidence declined a little.

• Sentiment remains below the neutral 100 level, but the combination of another Riksbank rate cut and increased Government fiscal spending (with particular emphasis on households) should support further improvements ahead. Key for both institutions is whether this translates to better real consumer spending/economic activity outcomes.
• Barring an unexpected shock. the Riksbank’s easing cycle is likely over after yesterday’s 25bp cut to 1.75%.
• Consumer confidence rose for a fifth consecutive month to 93.2, up from a year-to-date low of 82.2 in April. Relative to August, the “Macro” index (consumer’s perceptions of general economic activity) rose to 97.6 (vs 94.8 prior) while the “Micro” index (consumer’s perceptions of their personal economic situations) rose to 90.5 (vs 89.0 prior).
• Business sentiment is strongest in the retail sector (106.5 vs 105.8 prior), after a brief dip below 100 in June. Other sectors remain below neutral.
• Expected prices continued to decline (diffusion index of 12 vs 13 prior and a YTD high of 22 in March), supporting the Riksbank’s assessment that the summer inflation rise was likely to be temporary.
• The expected employment diffusion index was steady at 1, while the labour hoarding index eased to 3 (vs 5 prior).