Low productivity warning

Exceptionally expansionary monetary policy and the refugee influx are fuelling the Swedish economy but concealing weak underlying growth potential, according to Mats Kinnwall, chief economist at the Swedish Association of Industrial Employers (Industriarbetsgivarna).

Kinnwall, who is also chief economist at the Swedish Forest Industries Federation (Skogsindustrierna), says low interest rates have fuelled investment into property but other forms of investment are necessary in order to raise growth potential.

“We need a new internet, we need a regime shift,” he adds, noting that global productivity growth is weak

Booming economy

The National Institute of Economic Research said on Thursday that its Economic Tendency Indicator had climbed for a third successive month (ed.), from 106.2 in October to 107.9 in November.

SEB economist Carl Hammer commented that this indicated continued strong growth in the economy and that “it is pretty obvious that we do not need another round of expansionary monetary policy”.

Nordea’s Andreas Wallström noted that the indicator points towards GDP growth of 5 per cent, while colleague Torbjörn Isaksson highlighted the fact that retailers are signalling more modest inflation at the same time as household expectations on inflation had risen.

Deputy Riksbank governor Martin Flodén told reporters that the central bank’s forecast for the Swedish economy is starting to be a little on the low side compared to other forecasts, and that he had noted the Economic Tendency Indicator had climbed.

However, he is not convinced that this should lead to the Riksbank upwardly revising its forecasts.