Sweden’s inflation rate declines in sequential terms in August

14 September 2016, 07:38
Eko Rediantoro

Sweden’s consumer price inflation accelerates 1.1 percent year-on-year in August, unchanged from July’s year-on-year rate of 1.1 percent, said Statistics Sweden. It is a tad lower than consensus expectations of 1.2 percent but above Riksbank’s projection of 0.9 percent. On a month-on-month basis, the Swedish inflation fell 0.1 percent in August from July’s rise of 0.1 percent. Consensus expectation was 0 percent.

Increased prices of footwear and clothes contributed 0.41 percentage points to the rise in inflation. However, the rise was countered by a drop in airfares, which fell 27.8 percent, subtracting 0.2 percentage points from the headline figure. Prices related to domestic economy such as culture, restaurant and recreational services declined. This highlights that cost pressures continue to be modest.

The pace of inflation according to CPIF came in at 1.4 percent year-on-year, unchanged from July’s 1.4 percent, but lower than consensus and Riksbank’s projection of 1.5 percent and 1.6 percent respectively. On a month-on-month basis, CPIF inflation dropped 0.1 percent, as compared with the rise of 0.1 percent in July. It is on par with consensus expectations of -0.1 percent.

CPIF excluding energy came in at 1.4 percent in August, unchanged from July’s 1.4 percent and lower than Riksbank’s forecast of 1.5 percent. Nordea Bank mentioned in a research note that the inflation projection for the rest of 2016 is lower than the central bank’s forecast. Therefore, the central bank would be faced by continuous challenges in raising inflation. This strengthens the view that the government bond-buying program would be extended for the first half of 2017, stated Nordea Bank.

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