Missed inflations targets could be made flexible

Despite lowering the repo rate to -0.50%, the Riksbank has failed to bring up inflation to the two per cent target, which the bank’s leadership has been criticised for. The Riksbank now says that inflation targets could be made more flexible and a divergence of a percentage point up or down from the target could be allowed.

  However Professor Lars Calmfors is critical. “This creates a greater uncertainty than what the Riksbank is aiming for. It is adapting to what has happened and increasing acceptance for divergence and there is no reason for that.”

  However Annika Winsth, head economist at Nordea, welcomes the Riksbank’s thinking. “This has been eagerly awaited. We have long said that it would be better with a flexible view on inflation. They have fastened onto something that does not benefit Sweden.”

Food and e-commerce pushing Ikea’s growth

The Ikea group is putting a new record year behind it. Globally total sales increased by 7.1% to 34.2 billion euros, around SKr 326 billion. E-commerce represents 12% of growth.

  “The growth is driven by everything food related. We see that it is a good platform for continued growth and that the strategy we have put in place is working. We are growing in our existing stores and as long as we see continued good growth there, it will take a lot of expansion to beat that,” says Ikea President Peter Agnefjäll.

  At the end of 2017 Ikea enters a new market with over a billion inhabitants when it opens its first store in Hyderabad in India. Peter Agnefjäll says that Ikea is planning to open stores in Mumbai, Bangalore and Delhi as well over the next few years.

Competitors collaborate on powertrains

Volvo and Scania may be competitors but in order to develop the manufacture of heavy powertrains they are to collaborate in a new research lab.

  The new research centre at the Royal Institute of Technology (KTH) in Stockholm goes under the name of Powertrain Manufacturing for Heavy Vehicles Application Lab and is to be inaugurated on Tuesday. Scania and Volvo are industrial partners investing around SKr 10 million each plus a large number of engineering hours.

Proposal not going to pass

It did not take long for reactions to come to the government’s proposal on Friday for a quota system for company boards and the proposal is likely to be outvoted in parliament.

  The message from the Moderates was clear: quotas are not the right medicine for increasing equality. “We believe that business can do better, but we do not believe that legislation is the right way to go,” says the party’s group leader Jessica Polfjärd.

  Centre Party leader Annie Lööf accused the government of making it harder for women to start companies in the welfare sector and believes they ought to be dealing with the equality issues that women meet everyday in their regular jobs and incomes. The Christian Democrats and the Liberals are also against the idea.

Analysts believe in a bid

According to the Italian newspaper Il Sole 24 Ore, a Chinese company has made an offer for the bus division of AB Volvo. Advisors and banks are said to be evaluating a range of alternatives, including a listing.

One month ago, reports circulated in the media of Chinese interest in Volvo’s electric and hybrid buses, and one name being mentioned at the time was that of Zhengzhou Yutong Bus, China’s biggest bus maker.

AB Volvo has declined to comment the rumours. “When we have something to say, we will talk about it”.

Volvo’s bus division is a small part of the group, but is well integrated, which would speak against divestment. “I don’t believe Volvo’s intention is to sell the entire bus business, since a big part of Volvo’s strategy has been to build economies of scale in terms of engines, transmissions and chassis,” says Handelsbanken analyst Hampas Engellau.

John Hernander, portfolio manager at Nordea, and Engellau both believe a bid could be made for a part of Volvo Buses, for example its bus body business.

There has even been speculation recently that Volvo intends to sell its Construction Equipment division, and Engellau does not rule out that possibility either, saying “usually, there is never smoke without a fire”.

Indebted households not Ingves’ problem

The Riksbank said on Wednesday that it would leave its benchmark repo rate unchanged at a negative 0.50 per cent and that its bond purchase programme was running to plan.

Governor Stefan Ingves does not believe the central bank’s expansive monetary policy is overheating the economy. “Not as far as we can see at present. We believe inflation will reach 2 per cent sometime next year, we believe growth will be healthy in the coming years and unemployment will fall,” he has said to Svenska Dagbladet.

He reiterated his warning that low interest rates increase the risks associated with high levels of household debt and called for political measures to be taken.

He also said he would have no qualms about raising interest rates when the time was right, even if a number of households would find an increase problematic.

Union fury over deal

Svenska Dagbladet has revealed that in 2014 Hans Vesterberg, the then CEO of Ericsson, offered human resources head Bina Chaurasia, a bonus of 10 million kronor if she stayed with the company another two years rather than moving back to the US. The revelations have caused fury among the company’s union representatives, who issued a warning about Chaurasia’s methods back in 2013.

Union negotiator Per Norlander says Chaurasia has contributed to a drop in productivity, and a deterioration in the cooperative climate. “The consequence of this has been that the company’s ability to meet its challenges has deteriorated.”

With Ericsson needing to make major cutbacks, there is speculation that the telecoms company will close all its offices in Sweden, apart from Kista, and lay off between 5,000 and 10,000 employees. Ericsson currently has 15,000-16,000 employees in Sweden.

CEO sees threat to welfare

Thomas von Koch, CEO of private equity firm EQT, with holdings in several welfare companies (ed.), forecasts turbulent times ahead, should the government realise plans to limit profits in the welfare sector to 10%.

The CEO, who believes the government is also planning to stop freedom of choice in health care and education, calls on Stefan Löfven to be honest with people. “Swedes want to ban profit taking in welfare but they want freedom of choice; you can’t have both,” he points out.

He is adamant that EQT will adapt, if the government goes ahead with its plans, and will invest in education and health care in Germany, Norway, the US and China instead.

Economists forecast shift in trend


Between 2006 and 2014, Sweden’s centre-right alliance government cut taxes by a net SKr 140 billion. Since coming to power in 2014, the centre-left coalition government has implemented a wide range of tax increases, totalling a net SKr 40 billion. And, in the autumn budget, Finance Minister Magdalena Andersson proposes a further tax hike of SKr 9 billion.

While the government has a number of other tax proposals in the pipeline, including an airline tax and a tax on road wear, experts believe it will be difficult for the Social Democrats and their coalition partner, the Green Party, to raise taxes further in the next two years.

Anna Breman, Swedbank chief economist, points out that the government has already raised payroll charges for the under 25s, lowered the ROT tax relief and raised marginal taxes, while Daniel Bergvall, chief economist at SEB, believes the government parties don’t want to scare away voters with tax hikes so close to an election.

High-speed rail back on track

The government is planning to invite the alliance parties and the Left Party to discussions over the proposed high-speed rail link in the run up to a major infrastructure proposal in the autumn.

Infrastructure Minister Anna Johanson (S) would not comment on the negotiations but according to DI’s sources the government wants to get started as soon as possible.

Chair of the committee on transport and communications Karin Svensson Smith (Greens) describes the coming discussions as extremely sensitive with both money and status on the line. However she also says that it is impossible to bring order to the Swedish railway system if the government does not go ahead with the project. She hopes that the discussions will lead to a cross-party agreement.

The estimated cost of the high-speed rail link is SKr 230 billion.