Swedish CPIF inflation likely to have eased in September

Swedish inflation data for the month of September is scheduled to release later this week. According to a Nordea Bank research report, inflation is expected to have remained below the Riksbank’s forecast and the patter is likely to be repeated in the coming months.

“CPIF inflation was 1.1 percent in September according to our forecast. If this holds true, it will be the lowest reading since early 2016. Excluding energy, inflation was 1.4 percent, we think. Our forecasts are 0.2 percent point and 0.3 percent point, respectively, below the Riksbank’s view and the difference will widen in the coming months”, said Nordea Bank.

The Swedish central bank is facing significant challenges. Interest rate markets might price a higher likelihood of a rate cut around the turn of the year than currently indicated, given the too-low inflation, weak inflation expectations, year-on-year GDP growth likely approaching zero in the quarters ahead and a deteriorating labor market.

Clothing and footwear are the main drivers of price. The autumn collections might be introduced in stores, signifying higher prices compared to the earlier summer sale. Prices of clothing and footwear have been quite low in 2019 considering the soft krona. The krona’s persistent softness, higher import prices and signals from retailers imply, though, that prices would be raised slightly faster than usual going forward, said Nordea Bank.

Foreign travel prices fell in September as they usually do in the early autumn. Food prices saw a slight fall whereas prices of certain services rose.