2017.05.2610:28:00UTC+00Swedish Economy Likely To Continue Strong Growth Momentum

Sweden's economic growth is likely to pick up pace in the coming months of 2017, despite a decline in the recent economic tendency indicator, Stephen Brown, an economist at Capital Economics, said this week.

Official data from the National Institute of Economic Research released on Wednesday showed that the economic tendency indicator fell to 111.0 in May from 112.6 in April.

The slight decline in May was mainly due to a notable decrease in the manufacturing confidence. The corresponding index fell to 117.0 from 122.9 in the prior month.

Nonetheless, the reading still signals a very strong Swedish economy and broad based growth, Brown observed.

The consumer confidence index climbed to a 74-month high of 105.9 in May.

"With the labor market therefore set to tighten further, we expect stronger wage growth to drive a pick-up in underlying inflation," the economist said.

Citing its past form, Brown said the economic tendency indicator suggests that Swedish GDP growth will pick up to around 6.0 percent this year

He noted that with growth set to be strong across sectors, wage growth and underlying inflation should continue to rise.

"A shift in the Riksbank's stance is unlikely until its QE programme ends in December," Brown said.

"But not long after that, in Q2 2018, we expect the Riksbank to begin raising the repo rate."