The Swedish economy shrank unexpectedly during the second quarter, compared to the previous quarter, according to preliminary figures from Statistics Sweden.
Swedish GDP fell by 0.1 per cent during the second quarter, compared to the first. And compared to last year’s quarter growth was 1.4 per cent, which was a weaker development than most had expected.
The Riksbank had forecast growth of 0.1 per cent on the first quarter and 1.8 per cent at an annual rate. Nordea’s economists had forecast 0.2 per cent and 1.9 per cent respectively and SEB’s forecast was for 0.4 per cent and 2.1 per cent.
“The biggest difference was that investments fell slightly more than we had expected,” says SEB economist Olle Holmgren. As well as investments, net exports were a contributing factor. Exports fell by 0.3 per cent while imports fell 0.5 per cent.
Holmgren says, “It looks fairly weak ahead. This is a worrying sign for the Swedish economy. It confirms that growth is slowing.”
The credit rating institute Scope confirmed on Monday Sweden’s AAA rating, with a stable outlook. The top rating is supported by the country’s rich and diversified economy, a strong fiscal policy framework, low public debt and stable governance.
Challenges come from imbalances on the markets for financial assets, supported by an expansive monetary policy, rising levels of household debt and the banks’ continued dependence on short-term lending abroad.
Sweden has climbed a step in this year’s version of the Global Innovation Index and is ranked as number two in the world. Switzerland has retained its position as number one as the world’s most innovative economy, for the ninth year in a row.
“Global competition is increasing constantly, not least from Asia. It is now more important than ever to increase knowledge about intangible assets, such as unique skills, technology, brands and goodwill, and how you best use and protect them,” says Peter Strömbäck, director general of the Swedish Patent and Registration Office.
The National Institute of Economic Research (NIER) said on Thursday that sentiment in the manufacturing industry and the service industries was weaker than normal.
The economic tendency indicator for the manufacturing industry fell from 100 in June to 96.9 in July, while the indicator for the service industries fell from 98.3 to 96.5. Overall, the economic tendency indicator fell from 98.1 to 96.8 in July. Firms’ view of their order books and stocks of finished goods contributed to the decline.
Meanwhile, Michael Grahn, chief economist at Danske Bank, is concerned over the downward trend on the labour market. Data from Statistics Sweden shows that unemployment increased by 0.4 per cent to 7.6 per cent in June, from a year ago. Seasonally adjusted, the unemployment rate remained unchanged at 6.3 per cent compared to the previous month. This indicates that the labour market had peaked and is decelerating. “This is quite serious because then it is also difficult to make income grow. If the labour market is weak, nothing improves the outlook for the domestic part of the economy,” he says.
NIER forecast economic growth of 1.8 per cent this year, which will then fall to 1.4 per cent. Ylva Hedén Westerdahl, director of forecasting at the Institute, describes Brexit as a concern.
Minister for Financial Markets Per Bolund is less concerned over the signals, saying that the Swedish economy is basically strong and that there has been an economic boom for some considerable time. He considers that the economy has the capacity to change and respond to the economic climate
The likelihood of Britain crashing out of the European Union has increased with Boris Johnson as the new prime minister, writes Swedish Foreign Trade Minister Ann Linde in DI today.
She urges Swedish companies to closely study how they will be affected, if Britain leaves the single market and the customs union on 31 October.
“We want the EU to negotiate a deep and ambitious free trade agreement with the UK so that the conditions for all Swedes working in and with the UK are favourable. The government has therefore during the years of preparation given several assignments to our authorities, which means that we are well prepared to pursue our Swedish interests in such a negotiation. But right now more people need to focus on the consequences it could have for imports and exports if the UK actually leaves without a deal on 31 October,” she states.
The European Union will retaliate with extra duties on 35 billion euros worth of US goods, if Washington imposes tariffs of 25 per cent on cars manufactured in the EU, Trade Commissioner Cecilia Malmström told MEPs on Tuesday.
“It is already basically prepared, worth 35 billion euros. I do hope we do not have to use that one,” she said.
Transatlantic trade relations have been frosty since the US introduced tariffs on European steel and aluminum in May last year, which led to European punitive tariffs on selected US goods.
The European Commission and the White House subsequently agreed to work to reduce trade barriers between the blocs, but negotiations on an agreement have come to a standstill, since the US has made it clear that it also wants to include agricultural goods in the agreement, which the EU does not accept
Mobile operator 3 Sweden is taking the Swedish Post and Telecoms Agency, PTS, to court, accusing the regulator of poor regard for competition considerations when it came to last December’s auction of the 700 MHz band for 5G.
Telia as well as the Net4Mobility joint venture of Telenor and Tele2 paid SEK 2.8 billion to acquire blocks, while 3 did not acquire any. 3 claims the auction was designed to benefit companies with the “strongest financial muscle”, thereby distorting competition and breaching a number of EU directives.
PTS has said it has the support of the European Commission, is working towards the government’s broadband goals and that a block in the 700 MHz band is not necessary in order to offer 5G services.
Sweden’s coalition government is divided over plans to expand Stockholm’s Arlanda Airport, while Finland is in full swing reconstructing Helsinki Airport. Denmark is investing DKK 20 billion so that Copenhagen’s Kastrup Airport can handle 40 million passengers a year and Norway is to spend some NOK 17 billion on Oslo Airport, aiming to build a new runway by 2030.
Social Democratic Infrastructure Minister Tomas Eneroth believes the time has come to stop dithering, saying that Arlanda’s capacity needs to increase, if Stockholm’s Bromma Airport is to close.
AB Volvo’s operating margin rose 1.4 points to a record 12.5 per cent in the second quarter and the operating profit of SEK 15.1 billion beat a mean forecast from analysts by 11 per cent.
The truck division increased deliveries by 10 per cent, but new orders declined by 21 per cent on an annual basis in the quarter. In North America, new truck orders fell by 53 per cent.
CEO Martin Lundstedt has told DI that the truck maker has “held back” the order intake on the North American market in order to maintain quality, but there have also been signs of decline in contract and spot prices for freight, which has made customers cautious.
The order intake in Europe, the truck maker’s most important market, fell by 15 per cent in the quarter, a second indication that customers have become more cautious.
The number of electric car models available to consumers in Europe is expected to triple by 2021, according to an analysis by the European Federation for Transport and Environment (T&E), based on data by research firm IHS Markit.
The data shows carmakers will offer 214 electric car models in 2021, up from 60 models at the end of 2018. Forecasts indicate 92 will be fully electric models, 118 plug-in hybrid models and four hydrogen fuel cell models.
The trend will continue, with more than 330 electric car models by 2025. Volkswagen PSA, Toyota and Daimler will be among the major producers.
T&E writes in its analysis that the biggest electric car production plans will be in Western Europe, but Slovakia is forecast to have the highest level of production per capita in 2025.
Some 16 large-scale lithium-ion battery cell plants are confirmed or are due to begin operations in Europe by 2023, one of which is Northland’s plant in Skellefteå.
T&E analyst Lucien Mathieu believes the EU’s car CO2 emissions target of 95g/km by 2025 is a major force behind the new car models and that consumers will see more affordable options. Governments will need to do more, however, helping to roll out electric vehicle charging and changing taxation to make electric cars more attractive.
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