Restaurants and bars were teeming and hotels were fully booked in Stockholm in the week before Midsommar on June 24th, when Sweden celebrated the summer solstice. The Swedish capital did not give the impression of a country on the brink of a recession. The happy splashing out on wining and dining was doubtless related to the beautiful weather and catch-up consumption after the pandemic, but it is unlikely to last throughout the year. Many Swedish households are in dire financial straits thanks to an inflation-induced erosion of real wages not seen for 30 years. Forecasts are gloomy, with the European Commission predicting in May that Sweden would be the worst performer of all European economies in 2023, with a 0.5% contraction this year, though other forecasts are marginally less dire.
Sweden’s economy runs on two tracks, says Danske Bank, a Copenhagen-based bank, which actually thinks the economy will grow slightly this year. Consumers and the housing market are dragging the economy down; but the business sector and the labour market are both proving more resilient. Retail sales fell by 11.6% in March compared with the same month last year, according to Statistics Sweden, owing to soaring inflation, which in May was at an annual rate of 9.7%. And as Sweden’s central bank has raised interest rates, borrowing costs have increased, which in turn has caused a fall in house prices (see chart) that is faster than almost anywhere else in Europe. In the last quarter of 2022 they fell more than 10% year-on-year, according to Nordic Credit Rating, a Stockholm-based agency. Nordea Bank reckons they will drop by 20% from peak to trough.
The country’s biggest landlord, Samhällsbyggnadsbolaget i Norden (SBB), is on the brink of bankruptcy as it struggles to refinance its debt. Its bonds are rated as junk by S&P and Fitch, two credit-rating agencies. Hedge funds are shorting the shares of several debt-laden Swedish real-estate groups, and SBB in particular. The firm recently replaced Ilija Batljan, its founder, as CEO and is considering all strategic options, including an outright sale.
The economy’s second track is in better shape, as the business sector and employment are both holding up. Boosted by the weak krona, Swedish exports have grown strongly since the pandemic, and companies continue to invest in machinery, equipment and research. Construction is stable in spite of the slump in the housing market, because of the government’s investment in infrastructure. The jobless rate at 7.9% is tolerable.
The worst finally seems to be over, with retail sales and consumer confidence indicating that consumption has bottomed out. House prices may stabilise. “But inflation is still very high and the krona is very weak,” says Michael Grahn of Danske Bank. That’s why Riksbank, the central bank, raised rates, for the seventh consecutive time, by 0.25% on June 29th to 3.75% and is expected to increase rates by another 0.25% in September.
Mr Grahn and most of his peers predict that Sweden will muddle through and is not heading for a replay of the very painful recession in the early 1990s when another property bubble burst. Niklas Wykman, the financial-markets minister, recently told journalists that the state has the tools to stop a property-market plunge from dragging down the entire country. Sweden’s public finances are sound and its banks are, so far, stable and profitable. By the celebrations of Midsommar in 2024 Sweden is likely to be in better shape, if only slightly. ■
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
