There has been a 6% rise in company liquidations so far this year, according to business and credit reference agency UC. The hotel and restaurant industry has been particularly badly hit, and in July the sector saw a 19% increase in liquidations in relation to July 2016.
Eva Östling, CEO of Visita, the employer organisation representing enterprises in the Swedish hospitality sector, is not surprised. On 1 July 2016 the government scrapped the subsidy on payroll charges in the sector, raising the rate to 31.42%. Östling believes the industry is now feeling the full impact of the three-fold increase in the charge.
Östling points out that the industry should be enjoying a boom given the summer months and the strong economy, and expresses concern over the impact a recession will have on the sector, when people spend less on eating and drinking out.
Swedish mortgage lending growth has stabilised at around 7-8 per cent, while consumer lending growth has risen considerably in recent months. In June consumer lending rose to 9.4 per cent at an annual rate, the highest figure recorded since 2008.
Economists are concerned by the trend, warning that unsecured loans could lie behind the growth.
Social Democratic Finance Minister Magdalena Andersson’s Friday began well as Statistics Sweden released its national figures for the second quarter. GDP rose by 1.7% on the previous quarter and by 4% compared to Q2 2016.
“The Swedish economy is clearly extremely strong… It stands out clearly if you make international comparisons,” said Magdalena Andersson.
The figures exceeded expectations and Andersson pointed out several contributing factors, including household consumption increasing by 1.1%.
The Swedish krona weakened 5 öre against the euro when Prime Minister Stefan Löfven announced his Cabinet reshuffle on Thursday, although a number of economic indicators surprised on the upside.
Statistics Sweden reported that the employment rate, not seasonally adjusted, was 7.4% in June; analysts had forecast a rate of 7.5%. The seasonally adjusted employment rate was 6.4%, compared to 6.6% in May.
The National Institute of Economic Research (Konjunkturinstitutet) said its economic sentiment index had increased in July to 112.4, from 112.2 in June. Sentiment in the manufacturing industry had increased unexpectedly. However, consumer sentiment fell to 102.2, from 102.6.
The Institute reported labour shortages, which prompted SEB bank to question how long the Swedish central bank could ignore this trend.
Wednesday’s news that Sweden’s centre-right alliance parties are planning a vote of no confidence in three government ministers over a security breach at the Transport Agency had little impact on markets.
According to SEB economist Robert Bergqvist, the strong foundations of the Swedish economy and broad political agreement over the budgetary framework provide protection against political crises and a political vacuum.
Backed by the Sweden Democrats and the other centre-right alliance parties, local Liberal politicians in Skåne have proposed to the government that wine producers in the region should be allowed to sell their produce at their vineyards for a trial period of three years.
Green politician Anders Åkesson opposes the idea, saying it would undermine Systembolaget’s monopoly. Two government inquiries have already concluded that such an initiative would put the state monopoly at risk
Financial technology, or FinTech, has become a thriving industry in recent years with Sweden topping the league for FinTech investments per capita. New payment methods via mobile phones and simpler forms of identification mean that payments can be made from virtually anywhere. But the development of these new services is not without risk and Sweden’s Riksbank warned of growing uncertainty in its latest financial stability report from May. The central bank has warned that deposits could become more volatile, thereby increasing the liquidity risk.
At a first glance, the Volvo group’s interim report looked set to ignite a stock market rally; the group posted a 22% per cent increase in orders and an operating profit of SKr 8,540 million in the second quarter and raised its forecast for the North American truck market and the all-important Chinese construction equipment market.
But, when the Stockholm stock exchange opened the group’s share price fell and at close was down 3.4%. The main reason for this was that the Trucks division, which is Volvo’s largest business area, reported an operating margin of 9.6% for the quarter, which was 1.1 percentage points lower than expected. The margin was weighed down by delivery disturbances, mainly in Europe, and problems in the supplier chain.
Volvo hopes to resolve the problem over the summer and expects the impact of the disturbances to be lower in the third quarter.
The honeymoon for Ericsson’s new CEO Börje Ekholm is over. A string of bad news brought Ericsson’s shares down by 15.6%, the biggest negative reaction to a report since Q2 2002.
For the eleventh quarter in a row, turnover fell organically, now by 16% and all three of the company’s business areas Network, IT & Cloud and Media shrank. Lower software sales brought down gross margins to 30%, adjusted for structural costs – the lowest level for a second quarter during the 2000s and for the third quarter in a row the company reported an operating loss, this time of 1.2 billion kronor.
CEO Börje Ekholm has said that the launch of Ericsson’s focus strategy to regain Ericsson’s leadership meant tackling costs. Now they are to be lowered by 10 billion kronor by next summer. “We need to be in more of a hurry than we previously thought. The ambition is more than those ten, but that is what we must deliver.” There will be staff cuts in Sweden and abroad.
During 2016 Skanska’s shares improved by 30%. It went particularly well for the construction company during the second half of the year after Donald Trump was elected president in the USA and promised investment in infrastructure.
However despite great hopes for 2017, profitability has not kept up. In the first quarter operating margins were only 1.6%. On Friday the company notified of a write-down of 420 million kronor for its civil operations in the USA and a write-down of 360 million kronor for its British operations.
The profit in the group’s construction operations was only 0.2 billion kronor, which means the quarter’s profits are expected to fall to 1.5 billion kronor from 1.7 billion during Q2 last year.