Swedish September inflation review: Goods up, services down

Swedish inflation is still subdued overall, but rising goods prices and a weaker krona are likely to push the Riksbank toward further rate hikes.

• CPIF inflation was 1.5% year-on-year in September, while CPIF excluding energy was 0.5%, 0.20 percentage points below the Riksbank’s forecast and 0.07 points below Nordea’s estimate.
• Food prices fell 6.5% year-on-year, while core services inflation was weaker than expected; foreign travel prices rose 9% year-on-year, suggesting higher jet-fuel costs are reaching consumers.
• Prices for goods excluding food rose broadly, including home electronics, probably reflecting the weaker SEK and the earlier increase in global transport costs.
• Energy contributed 0.94 percentage points to headline CPIF inflation, above Nordea’s 0.84-point estimate and the Riksbank’s 0.76-point estimate.
• Household consumption increased 3.5% year-on-year and 1.1% month-on-month in September, with monthly spending rising in 9 of 11 product groups, although August consumption was revised down to -0.4% month-on-month.

Takeaway: Nordea expects the Riksbank to raise rates in November and February, taking the policy rate to 2.25%, because a weaker SEK, higher energy prices and robust growth should lift inflation despite currently modest underlying pressures.