Download Swedish Economic Trends

Swedish Economic Trends
February 2006
Sources of GDP Growth
(%y-o-y)
Economic Growth
4
2
0
-2
Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05
Domestic sales
 Export growth has stabilised, helped by
accelerating euro-area demand which
has boosted growth in Sweden’s major
export markets.
 Investment spending has been the most
rapidly growing element of economic
activity. Dwelling investment has been
rising by around 20% y-o-y.
 Private consumption growth was steady
at 2% from 2003 to early 2005 but then
accelerated to 3% last year.
Dec-04 Mar-05 Jun-05 Sep-05
Consume2.1
1.4
2.6
3.0
Govt
-0.5
-0.5
-0.3
0.2
Invest
9.2
10.1
10.4 10.5
Stocks* -1.5
-0.2
-0.3
-2.0
Exports 11.0
5.3
3.1
8.2
Imports 8.2
5.8
4.4
6.9
GDP
2.9
2.3
2.3
2.8
6
 GDP growth reaccelerated towards 3%
y-o-y in the second half of 2005.
 Slower export growth caused a
slowdown in the first half of the year but
accelerating domestic spending has
now become the dominant force.
 The acceleration of growth has led to
rising
capital
utilisation.
Higher
investment spending by firms stabilised
the situation last year but the degree of
spare capacity is lower than historical
norms.
 Employment growth resumed in the past
year. Labour market developments in
the past few years have been
surprisingly slow in comparison with the
robust GDP growth.
 Unemployment stopped rising in the first
half of 2004 and has since declined. The
unemployment rate was a little over 5%
of the labour force by the middle of last
year.
Stocks
Net exports
*GDP
Stocks are contribution to growth
Fixed Capital Investment
(% y-o-y)
Exports and Global Demand
(% y-o-y)
21
6
Exports
30
Dwelling
20
14
4
7
2
0
0
10
0
-10
Non-Dwelling
-20
-7
Mar-85
Trading partner growth (rhs)
Mar-90
Mar-95
Mar-00
-2
Mar-05
-30
Sep-93
Sep-96
Sep-99
Sep-02
Sep-05
Current Account
(% of GDP)
Private Consumption
(% y-o-y)
Consequences of Economic Growth
 Despite the period of slower export
growth and the recent acceleration of
domestic demand, the current account
remains in a surplus of over 6% of GDP.
Real GDP
(%y-o-y)
9
6
6
4
3
2
0
0
-3
-2
Mar-93
Mar-98
-6
Mar-92
Mar-03
Mar-95
Mar-98
Mar-01
Mar-04
Labour market
(% of labour force)
Capacity Utilisation
(%)
(%)
2
92
4
Employment (rhs)
89
4
1
86
6
-2
83
8
-5
Unemployment
80
Mar-85
Mar-90
Mar-95
Mar-00
Mar-05
10
Mar-85
Mar-90
THIS DOCUMENT IS FOR INFORMATION PURPOSES ONLY AND IT SHOULD NOT BE REGARDED AS AN OFFER TO SELL OR AS A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES OR OTHER INSTRUMENTS MENTIONED IN IT. NO PART OF THIS DOCUMENT MAY BE REPRODUCED IN ANY MANNER WITHOUT THE WRITTEN PERMISSION OF
PENRICH CAPITAL. WE DO NOT REPRESENT THAT THIS INFORMATION, INCLUDING ANY THIRD PARTY INFORMATION, IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE
RELIED UPON AS SUCH. IT IS PROVIDED WITH THE UNDERSTANDING THAT PENRICH CAPITAL IS NOT ACTING IN A FIDUCIARY CAPACITY. OPINIONS EXPRESSED HEREIN
REFLECT THE OPINION OF PENRICH CAPITAL AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE PRODUCTS MENTIONED IN THIS DOCUMENT MAY NOT BE ELIGIBLE
FOR SALE IN SOME STATES OR COUNTRIES, AND THEY MAY NOT BE SUITABLE FOR ALL TYPES OF INVESTORS.
Mar-95
Mar-00
-8
Mar-05
Inflation
 Consumer price inflation is substantially
below the central bank’s 2% target.
Inflation has been steady at a little
below 1% since early 2004.
 Falling prices for food, clothing and
communications
have
suppressed
overall inflation in recent years.
Transport has provided the biggest
source of inflation.
 Labour productivity has accelerated
sharply from the cyclical trough of 2001.
In the past year, labour productivity has
grown by 3%-4%.
 Wage inflation has been steady for most
of the past three years, remaining at
about 3% per annum. In conjunction
with rapid labour productivity growth,
this has led to falling unit labour costs.
Consumer Price Inflation
(%y-o-y)
10
8
6
Riksbank Target
4
2
Underlying
0
Headline
-2
Mar-85
Mar-90
 The Riksbank has increased official
rates by 0.5% since their trough. The
very low level of inflation has meant the
Swedish central bank was one of the
last to begin raiding rates. Real interest
rates are close to 1%.
 The Krona appreciated as the central
bank raised interest rates but, in real
terms, the currency is still near the low
point reached in 2001.
Mar-05
Unit Labour Costs and Wages
(% y-o-y)
6
6
4
4
2
2
0
0
Wages
ULC
Mar-90
Government Policy
 Ongoing fiscal surpluses have allowed
the government to gradually reduce its
debt level. Debt is close to 50% of GDP.
Mar-00
Labour Productivity
(% y-o-y)
-2
Mar-85
 The government accounts have been in
surplus for most of the past decade.
Expenditure has stabilised after the
widespread spending cuts enacted after
the crisis of the mid 1990s.
Mar-95
Consumer Price Inflation
(% y-o-y)
2003
2004 2005
Total
1.9
0.4
0.5
Core
2.2
0.8
0.8
Food
0.3
-0.4
-0.7
Clothing
0.0
-1.9
-1.1
Housing
4.3
0.2
0.4
Health
2.8
3.8
2.3
Transport
1.8
3.8
4.3
Communicate -1.5
-4.4
-6.2
Recreation
-0.2
-1.5
-1.7
Mar-95
Mar-00
Mar-05
-2
Mar-90
Mar-95
Fiscal Balance
(% of GDP)
Mar-00
Mar-05
Government Debt
% of GDP)
71
6
90
Balance (rhs)
75
66
0
45
Revenue
61
60
-6
30
15
Expd
56
-12
1985
1989
1993
1997
0
1985
2001
1993
1997
2001
Real Trade-Weighted Krona
(J.P. Morgan Index)
Official Interest Rates
(%)
125
12
Nominal
9
115
105
6
3
0
Mar-85
1989
95
Real
Mar-90
Mar-95
Mar-00
Mar-05
85
Jan-90
Jan-95
Jan-00
Jan-05
Other Developments
 House prices have risen rapidly in
recent years, probably fuelled by low
interest rates. House price inflation has
averaged 9% in the past three years.
Rising house prices are almost certainly
a factor supporting dwelling investment.
 Despite low interest rates and rapidly
rising asset prices, household savings
have remained relatively high.
Household Savings Rate
(% of Disposable Income)
House Prices
(% y-o-y)
12
20
9
15
6
10
3
5
0
0
-5
Mar-90
-3
-6
Mar-95
Mar-00
Mar-05
1985
1989
1993
THIS DOCUMENT IS FOR INFORMATION PURPOSES ONLY AND IT SHOULD NOT BE REGARDED AS AN OFFER TO SELL OR AS A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES OR OTHER INSTRUMENTS MENTIONED IN IT. NO PART OF THIS DOCUMENT MAY BE REPRODUCED IN ANY MANNER WITHOUT THE WRITTEN PERMISSION OF
PENRICH CAPITAL. WE DO NOT REPRESENT THAT THIS INFORMATION, INCLUDING ANY THIRD PARTY INFORMATION, IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE
RELIED UPON AS SUCH. IT IS PROVIDED WITH THE UNDERSTANDING THAT PENRICH CAPITAL IS NOT ACTING IN A FIDUCIARY CAPACITY. OPINIONS EXPRESSED HEREIN
REFLECT THE OPINION OF PENRICH CAPITAL AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE PRODUCTS MENTIONED IN THIS DOCUMENT MAY NOT BE ELIGIBLE
FOR SALE IN SOME STATES OR COUNTRIES, AND THEY MAY NOT BE SUITABLE FOR ALL TYPES OF INVESTORS.
1997
2001