2017.06.2310:18:00UTC+00Swedish Growth Likely To Pick Up Pace In 2017: Capital Economics

The improvement in the economic sentiment suggest strong and broad-based growth in the Swedish economy over the coming months of 2017, consistent with an acceleration in wage growth and a pick-up in underlying inflation, Stephen Brown, an economist at Capital Economics, said this week.

The economic tendency indicator rose to 112.1 in June from 111.7 in May, data published by NIER showed on June 21.

Among components, the retail sentiment index improved notably from 100.3 to 107.2 in June, the highest since January 2016.

In contrast, consumer confidence worsened from 105.6 to 102.5, which was the lowest score since September 2016.

The economist observed that it was unclear why consumers became less optimistic about the economy in June, despite a strong labor market, while Swedish equities have performed well in recent months.

"At any rate, the level of consumer confidence still seems consistent with a rise in annual household spending growth from first quarter's 1.2 percent to over 2.0 percent," Brown noted.

The latest Economy Tendency indicator suggest that Swedish GDP growth could pick up to around 6.0 percent in this year, the economist pointed out.

Brown expects underlying inflation to accelerate this year towards the Riksbank's 2.0 percent target.

A shift in the Riksbank's stance will be happen only after its QE programme ends in December, the economist noted.

"But not long after that, probably in April 2018, we expect the Riksbank to begin raising the repo rate," Brown said.