Sweden’s growth prospects remain among the best in Europe

Sweden's growth prospects remain among the best in Europe - real GDP is forecast to grow by 2.7% in 2015. High frequency survey data suggest that economic conditions are improving, with the headline economic-tendency indicator edging higher for a third consecutive month in September. The details of the report also suggest that growth could become more broad-based as industrial confidence climbed sharply, while healthy book orders point to higher industrial production over the coming months. Services and retail sector indicators have recently softened, however, expectations remain generally optimistic. 

Meanwhile, despite a modest decline in consumer confidence, tight labour market conditions, low borrowing costs and muted inflation, at -0.2% y/y in August, continue to bode well for household spending. The Riksbank decided to keep its key repurchase rate unchanged at -0.35% and the size of its quantitative easing program at SEK135bn in September-December 2015. However, we cannot rule out the possibility of further easing if the pullback in global oil prices, lower electricity tariffs and upward currency pressure threatens to derail the recovery. Swedish inflation is expected to average roughly 0.1% this year from -0.2% in 2014.