Swedish Confidence Drops for a Fifth Month on Consumer Gloom

(Bloomberg) -- Swedish economic confidence declined for a fifth straight month in September, with consumer confidence sliding to near a seven-year low to cast further doubt on the central bank’s plan to exit negative interest rates by the end of the year.

The Economic Tendency Indicator fell to 94.6 from a revised 95 in August, the National Institute of Economic Research in Stockholm said Thursday. Economists surveyed by Bloomberg had predicted it would rise to 95.2, according to a median estimate.

Key Insights

• The consumer confidence gauge slid to 90.6 from 93.3. It’s now at the lowest since the end of 2012 and shows “a much more pessimistic view of the economy than normal,” according to the NIER. “Expectations for unemployment contributed most to the decline.”
• Manufacturing confidence rose to 96.7 from 95.6, “but remains somewhat below the historical average, however, which can be explained by firms’ subdued production plans,” the NIER said.
• Sweden’s central bank this month kept intact a plan to raise interest rates toward the end of the year to zero again in a bet the economy will avoid an outright contraction as a trade war weighs on global growth. Even so, unemployment has jumped to a four-year high over the summer, signaling a deeper deterioration in the labor market.
• In one piece of encouraging news for the central bank, inflation expectations gained. The expected 12-month ahead rate picked up to 3.5% in September from 3.3% in August, according to the survey.

What Economists Say

• The indicator “eased marginally” and “sits quite well in line with our below-consensus GDP forecast,” said Johan Lof, an economist at Svenska Handelsbanken AB. “The ETI can’t fall further without significantly challenging the more optimistic forecasts of the Riksbank and the government.”
• “Mixed sentiment signals from Sweden in September,” said Andreas Wallstrom, an economist at Swedbank AB. “While consumer confidence declined, sentiment among retailers, manufacturers and builders actually improved somewhat. Hiring plans continued down but still point to rising, not falling, employment.”
• “All in all, the survey was weak, in line with expectations,” said Torbjorn Isaksson, chief analyst at Nordea Bank Abp. “Indicators for the labor market are mixed. Employment plans are less bad than hard data while households are concerned over the situation on the labor market. The bottom line is that the Riksbank is too optimistic on pretty much everything.”

Market Reaction

• The krona was little changed at 10.6734 per euro as of 9:28 a.m. in Stockholm.

Know More

• For more, see this table

To contact the reporter on this story: Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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