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Economy in Brief

Sweden's CPI Soars As Transport Costs Escalate
by Robert Brusca  April 14, 2022

Sweden saw inflation jump in March, rising by 2% month-to-month on the HICP measure. This is a much stronger gain than the 0.2% rise in February and even the 0.5% increase in January.

Inflation in Sweden continues to accelerate sharply. Sequentially, Swedish inflation starts at 6.3% over 12 months; that pace rises to a 9.4% annual rate over six months and that, in turn, further escalates to an 11.5% annual rate over three months. Sweden's inflation has jumped ahead and is showing extreme pressure in March.

Inflation diffusion (breadth)
A look at the summary statistics on inflation diffusion at the bottom of the table shows that inflation over three months compared to six months rises in 87% of the categories -there are eight of them in the table. Diffusion also rises in 87% of the categories over six months compared to 12 months, and it rises in 87% of the categories over 12 months compared to the previous twelve months. Inflation is accelerating broadly over each of these timelines and the increase in inflation from period to period is significant.

Monthly pressures
In March, Sweden posts deceleration in a select few categories: inflation for clothing & shoes with a 0.5 month-to-month drop that is a larger drop than in February shows deceleration; recreation & culture prices decelerate to a 1% pace down only slightly from 1.1% in February month-to-month; in education there is a technical month-to-month drop that does not register rounded to one decimal-both months rad ‘zero' in the table. The upward pressure on inflation in February remains high and broad-based. In February, there are three month-to-month inflation decelerations against a series of much larger increases. January saw decelerations in only two of eight categories while six of eight registered acceleration.

Sequential pressures
Of the 24 observations on inflation changes period-to-period (that's eight items over three periods: three-months, six-months, and 12-months), only three show period-to-period deceleration. Obviously over the past year inflation has spread broadly in Sweden. Housing costs gains while high at 7.9% year-over-year (above the HICP pace of 6.3%) proceeded to lose momentum over six months and again over three months. That makes housing a substantial outlying reading. The only other weaking of inflation over these periods is over 12 months compared to the 12-month period of 12-months ago - that is for clothing & shoes. Apart from those three exceptions, price gains accelerated over all three periods in 21 of 24 comparisons – led in each period by transportation costs because of rising energy prices.

Quarter-to-date
The quarter-to-date inflation pressures show inflation for the finished quarter at an 8.6% annual rate. This is lower than the three-month rate and lower than the six-month rate. But quarter-to-date figures tend to be more sluggish because they are for the current quarter that's a three-month average compared to the quarter before which is another three-month average. These broad average figures are still compounded at an annual rate and 8.6% is still a particularly high inflation rate. The inflation rate for the first quarter of 2022-to-date is now completed; it compares to a fourth quarter rate of 6.4%. Inflation is still accelerating quarter-to-quarter, a gain of more than two percentage points on the quarterly period. Looking down the line items at quarter-to-date metrics, inflation eases a little bit for housing QTD, for recreation & culture, and for education. However, all other categories show inflation accelerating in the first quarter compared to the fourth quarter. This is not surprising given the strong sequential trend that we see although the quarterly averaging process can produce slightly different reports from the sequential data.

Summing up for Sweden
On balance, Sweden is in the grip of the same kind of inflation that we've seen in Germany, the United Kingdom, and the United States. Clearly a good deal of this inflation is driven by energy, by heating oil costs, by natural gas costs, by gasoline costs and by knock-on effects which are a little harder to gauge. However, Sweden, a country with its own currency and not part of the European Monetary Union, continues to show that these same sorts of forces are impacting its economy and its inflation rate. Having a floating exchange rate is not giving it any insulation from imported inflation. Sweden is part of this global process where inflation has moved up and continues to require responses from central banks everywhere except Japan.

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