Sweden Inflation Slows On Electricity Prices

swedenflag july30 20feb23 lt

Sweden's consumer price inflation slowed slightly more than expected in January on electricity prices, official data revealed Monday.

Consumer price inflation slowed to 11.7 percent in January from 12.3 percent in December, Statistics Sweden reported. This was slightly slower than economists' forecast of 11.8 percent.

The 12.3 percent inflation in December was the highest since February 1991, when prices had grown 13.1 percent.

Likewise, the consumer price index with fixed interest rate increased at a pace of 9.3 percent annually, slower than December's 10.2 percent rise. Economists had forecast prices to gain 9.4 percent.

"The inflation rate according to the CPI was higher than CPIF because of the increased mortgages interest rates," Mikael Nordin, statistician at Statistics Sweden said. "This effect is eliminated from CPIF. Otherwise, the two measures are similar."

The fall in the central bank's target measure of inflation was largely due to a huge one-off drop in electricity prices but policymakers will focus more on the big increase in core inflation, Capital Economics' economist Andrew Kenningham said.

Earlier this month, Riksbank raised its benchmark rate by half-percentage point to 3.00 percent, to curb the weakness in currency and hinted at further tightening during the spring.

The central bank expects inflation to rise to 8.6 percent in 2023, before easing sharply to 3.6 percent next year.

The minutes of the monetary policy meeting held on February 8, released Monday, highlighted that the weak currency is making it more difficult for the Riksbank to bring inflation back towards the target.

"Tightening monetary policy more now reduces the risk of inflation becoming entrenched and creating more serious problems for the real economy," the minutes said.

Official data today showed that the annual increase in the CPIF excluding energy rose to 8.7 percent annually from 8.4 percent in the previous month.

Month-on-month, consumer prices fell 1.1 percent in January, as expected, compared to a drop of 0.5 percent in the same period last year. Similarly, the CPIF decreased 1.3 percent versus forecast of -1.2 percent.

The monthly fall in overall consumer prices was driven by the 27.4 percent plunge in electricity prices. Also, prices of clothing, furniture and transport decreased and made a downward contribution to the CPI.

Another report from the statistical office showed that total inventories in industry increased by SEK 0.6 billion from revised SEK 6.5 billion in the third quarter. Business inventories decreased by SEK 10.7 billion.

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