Swedish Exporters See Higher Western-Europe Demand, Study Shows

Swedish exporters’ confidence in western European markets climbed to the highest in more than two years after the euro-area emerged from a record-long recession in the second quarter, led by Germany and France.

An index measuring exporters’ expectations of demand from western Europe reached 56.1 in the third quarter, where a reading over 50 signals expansion, compared with 49.1 in the second quarter, Business Sweden said in a report today. The reading was the highest for western Europe since the second quarter of 2011, it said. The overall export managers’ index rose to 56.5, from 51.6 in the second quarter.

“This indicates that there are underlying reasons to expect improvement that a lot of companies are seeing,” Mauro Gozzo, chief economist at Business Sweden, said in an interview in Stockholm today.

Sweden, which sends some 40 percent of exports to western Europe, has seen economic growth slow and unemployment rise as a result of slumping European demand in the wake of the region’s debt crisis. Sweden, home to companies including Volvo AB (VOLVB), Electrolux AB (ELUXB) and SKF AB (SKFB), exports about half of its output, of which 70 percent is shipped to Europe. The 17-nation euro-area economy expanded 0.3 percent in the three months through June, ending a run of six quarterly contractions.

Companies with annual export sales of as much as 250 million kronor ($38.3 million) were more positive about demand in western Europe than companies with exports exceeding that number, Business Sweden said. Still, the biggest improvement was seen among larger companies, the report showed.

Smaller Companies Positive

The subindex measuring expectations of demand among large Swedish exporters rose to 55.8 in the period from 48.5 in the second quarter. The subindex for smaller Swedish exporters climbed to 61.1 from 59. Business Sweden surveyed 225 companies between Aug. 6 and Aug. 20.

“The reason small companies are more positive could be because they are more niched while large companies are more affected by the macro-situation as a whole,” said Gozzo.

The strong krona has pressured earnings at Swedish companies with a majority of production in Sweden, such as pulp and paper makers, as well as at small companies with sales mainly in Europe. The krona’s 1.8 percent drop against the euro since June 24 will probably not alleviate the situation much, Gozzo said.

“From a historical point of view, the level is still pretty high,” he said. “It’s a tougher world out there and likely to remain so.”

To contact the reporter on this story: Janina Pfalzer in Stockholm at jpfalzer@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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