Make the message clear: Prematurely declare the crisis dead

THE SWEDISH ECONOMY

Economics (TT)

Inflation is subsiding both in Sweden and in the rest of the world, but it is still too early to celebrate. Many really tough months lie ahead, the experts warn.

– Unfortunately. The recession is coming in on a broad front, says Annika Winsth, chief economist at Nordea.

Interest rate increases may come

Annika Winsth believes that it is possible that the Riksbank will cut back with another interest rate increase on Thursday morning. Despite the good signs.

Jens Magnusson, chief economist at SEB, thinks we should rejoice a little at all the good signs that inflation is subsiding.

– After all, this is what we’ve been waiting for. The hope is that there will be no more interest rate increases.

But we should wait with the celebration, he thinks.

– Inflation is still high, three times as high as the inflation target. And part of the big picture is that the economy is slowing down.

Maria Landeborn, equity strategist at Danske Bank, takes a brighter view of the inflation threat.

– But it’s not quite over. It’s rare that all the signs point in one direction, she says.

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The recession blows in

But Annika Winsth now sees that the recession is spreading. Some industries, such as the construction sector and trade, have been warning of bad times for a long time. But now more people are affected, and many forecasts point downward.

– All sectors are now slowing down, including foreign trade, says Annika Winsth.

She foresees that 2024 will be a really weak year.

– Especially the first half of the year. The price of money will be high for a long time.

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Labor market

Many have been surprised that unemployment has remained so low, even though the Riksbank has peppered it with interest rate increases. A year ago, in October 2022, 332,600 people were registered as unemployed with the Employment Agency. In October this year, the number had increased slightly, to 334,400. But from many industries there are rumblings of cutbacks, and the number of notices is increasing.

– Now the labor market is starting to deteriorate, and households are starting to notice that the economy is getting worse, says Winsth.

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Housing prices

Annika Winsth also sees that there is a risk that housing prices will fall further. This means that households notice the decline particularly clearly, she notes.

Since housing prices peaked in March and April last year, prices have fallen by 10 percent for condominiums and 13 percent for villas, according to figures from Mäklarstatistik.

Per-Arne Sandegren, head of analysis at Mäklarstatistik, does not see any bright signs for housing prices right now. Despite the glimmers of hope that inflation is falling.

– No, we do not make actual forecasts. But we see no rebound in the housing market. It’s mostly gray weather, as November is, he says.

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Weak crown

The krone has strengthened in recent weeks. But the weak Swedish krona is still a concern. When the Riksbank considers whether a further interest rate increase is needed, the krona is of great importance for that decision, according to Annika Winsth.

A weak krona makes interest rate increases more necessary, and it will also take longer before the interest rate can be lowered again, she believes.

– The underlying inflation is still too high, over 6 percent. The goal is 2 percent, she says.

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Shaky stock market

The Stockholm Stock Exchange has also been doing well recently. Maria Landeborn states that it is not yet time to prepare for a stock market rally.

– No, there will be figures and news that worry the stock markets. But these signs point to another step towards the soft landing we were hoping for.

Still, she’s a bit positive. The stock market is ahead of the rest of the economy and looking ahead, and at some point the misery will be over. Even if the road there is shaky. Maybe the lead is about as much as nine months. The question is whether it is buying mode for shares now.

– Yes, if you have money left over that you won’t need for a long time. If you want to add small company funds, it can be good in the long term, small companies are hard pressed now.

Although you need to have quite a lot of courage. The stock market will not go straight up.

– The price you pay for making money on the stock market is that you have to have a stomach ache in between. But the money grows, says Maria Landeborn.

Johanna Cederblad/TT