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Swedish Manufacturing Unexpectedly Shrinks as Orders Plunge

Sweden’s manufacturing unexpectedly shrank in August at the fastest pace since May 2009 as the krona’s appreciation sent export orders plunging amid sagging demand from debt-stricken Europe.

The purchasing managers’ index fell to a seasonally adjusted 45.1 from 50.6 in July, Stockholm-based Swedbank AB (SWEDA), which compiles the gauge, said today. A reading below 50 signals a contraction. The index was seen falling to 50.1, according to the average estimate of 10 economists surveyed by Bloomberg.

Sweden won’t go unscathed through this period of an international slowdown,” said Roger Josefsson, chief economist at Danske Bank A/S in Stockholm. “In contrast to data that’s been published earlier, this is data that’s come in after the still recent strengthening of the krona.”

Sweden’s central bank, which is set to announce its next interest rate decision on Sept. 6, in July kept its key rate unchanged and pushed back tightening plans because of turmoil in Europe. The Nordic country relies on sales abroad for about half of its output and sends 70 percent of its exports to Europe where economies are contracting amid austerity measures.

The krona fell 0.6 percent to 8.3893 per euro and 0.7 percent to 6.6724 per dollar as of 9:55 a.m. in Stockholm after strengthening more than 9 percent against the euro since May 17.

The currency hit a 12-year high of 8.17 per euro last month as the largest Nordic economy emerged as a haven from Europe’s debt crisis.

The PMI’s production sub-index fell to 45.8 from 54 while the order index fell to 41.1 from 51.2. The employment index declined to 45.1 from 47.7.

“This is an indication that things will look much weaker going forward,” Josefsson said. “This probably can’t be dismissed as a blip in the data since the reading was broad- based if one looks at the details of the release.”

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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