Swedish inflation comes weaker than expected in January, likely to be lower in 2018

Swedish inflation came in below expectations in the month of January. On a year-on-year basis, the consumer price inflation came in at 1.6 percent, as compared with consensus expectation of 1.8 percent and Riksbank’s projection of 1.7 percent. On a sequential basis, CPI fell 0.84 percent, as compared with consensus expectation of a fall of 0.7 percent.

Inflation measured by CPIF came in at 1.7 percent year-on-year, as compared with consensus and Riksbank’s expectations of 1.9 percent. On a sequential basis, the print fell 0.9 percent. Excluding energy, CPIF inflation came in as low as 1.5 percent year-on-year in January, also 0.2 percentage point below the Riksbank projection.

Prices for clothing and footwear were the main surprise, negatively contributing the CPIF by 0.66 percentage point on the month. Most other components came consistent with forecast. Prices for clothing and footwear might recover in February; however, the overall trend is nevertheless subdued.

The impact on the updated basket of goods was -0.16 percent point on the month, which is consistent with the historical average and in line with the call, noted Nordea Bank.

“January inflation was lower than we had expected but very much in line with our long held view that inflation will be lower this year. Coupled with lower GDP growth and uncertainty related to the housing market, this will keep the Riksbank side-lined throughout 2018, we think”, added Nordea Bank.

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