STOCKHOLM: Consumer confidence slid for a seventh month in Sweden amid sliding housing prices and a tumbling krona, adding to woes as the largest Nordic economy now also faces a possible trade war.
The National Institute of Economic Research’s consumer confidence indicator unexpectedly slid to 96.8 in June, which is the lowest in almost two years. Swedes became more pessimistic about their own personal finances and the overall economy amid turmoil in the housing market. Inflation expectations jumped in the month.
“Despite the fact that we have had an economic boom households are less optimistic than normally,” said Ylva Heden Westerdahl, head of forecasting at NIER. “We find this surprising considering that the real disposable incomes are increasing this year thanks to the expansive fiscal policy. But we think that worries in the housing market are having a negative effect.”
The overall indicator, which also includes business confidence, was little changed at 108.7 and “continues to reflect strong sentiment in the Swedish economy,” the NIER said.
Nordea Bank AB chief analyst Torbjorn Isaksson said the report was a “mixed bag for the Riksbank.”
“Sentiment in the business sector remains healthy, indicating sustained GDP growth,” he said in a note. “Moreover, the uptick in inflation expectations is good news for the Riksbank. However, the pessimism among households’ raises question marks for domestic demand and thus for the growth outlook.”
SEB AB’s savings’ barometer, also released on Wednesday, showed Swedes’ net wealth sank for a second quarter in a row in the first three months of 2018. That’s the first time that has happened since 2009. The housing market has stabilized after sharp declines at the end of last year. Residential property prices rose 0.1% on the month in May, according to the Nasdaq OMX Valueguard-KTH Housing Index, HOX Sweden.
The krona has slid to a near record low this year against the euro on concern over Sweden’s property market and is now being driven lower amid fears of a global trade war.
The NIER said on Wednesday that the Swedish economy will likely peak this year as falling housing investments will be a drag on growth next year. But a strong labour market will drive up wages and allow for inflation to stabilize around the 2% target in 2018 and 2019, it said. The central bank won’t raise rates until next year.