Sweden June CPI, cooling prices

Sweden CPIF inflation might once again drop below 1%. Normally the summer sale of clothing and footwear begins in June. This year the spring was unusually cold, and clothing and footwear sales appear to have been weak.

This suggests that the sale may have started a bit earlier than previously and also involved more goods than normally in June. The markdowns of clothing and footwear are consequently expected to have been greater than last year. Prices of these goods are one of the major uncertain factors when judging inflation in June, with risks on both the upside and the downside.

"The Sweden CPI to be down 0.1% m/m in June", says Nordea bank. 

Import prices of clothing and footwear have increased significantly. While import prices are by no means a perfect indicator, they nevertheless suggest a further rise in clothing prices this year. Electricity prices dropped in June, lowering the CPI by nearly 0.1% point. There might be a rise in electricity prices until the end of the year.

Package holidays as well as international flights most likely became more expensive in June, both due to seasonal factors and due to the previous krona weakness. Perhaps the bad weather also plays a role here.

The differences in the month-on-month change are attributable to lower clothing and footwear prices as well as lower energy prices. This year lower price increases are predicted in June following the strong rise in May.

Looking ahead, CPIF inflation rising in the second half of the year and around year-end, but it will only hit 2% for a month or two. So the challenges for the Riksbank remain, added Nordea bank.