Sweden’s manufacturing industry reaches wage agreement, other sectors unlikely to follow benchmark

Sweden’s manufacturing industry’s labor market parties have reached an agreement for the upcoming 12 months, where wages will be increased by 2% and 0.2% more point will be raised for pensions. The wage benchmark was set for other sectors too.

Wage agreement for manufacturing industry was slightly lower than Nodea Bank’s 2.3% rise. However, it is doubtful if other sectors will follow the benchmark. It is unlikely that other sectors will follow this, according to Nordea Bank. Both government’s Mediation Office and employers will try and make sure that current structure is sustained and that other sectors will follow, added Nordea Bank.

There is slight agreement that wage deals in education and health care will be more than the mark. Construction sector appears to have the biggest negotiation gap between employees and employers. But if construction sector has higher pay rises, it will not be much farther than the 2% mark. Overall, Sweden’s wage agreement might be slightly higher but not far from the mark set by manufacturing sector, notes Nordea Bank.

For the central bank, the manufacturing sector’s wage deal is on the dovish side. The agreement is possibly slightly lower than Riksbank’s expectations. Moreover, wage hikes at these levels are possibly very low to push inflation to 2% target rate. Also, the one year deal indicates that the central bank might need to continue boosting inflation outlook before next year’s pay talks.

“We stick to our view that the Riksbank will not cut rates further but extend the QE programme for H2 2016”, says Nordea Bank.