Sweden’s Krona Surges as Confidence Index Exceeds Estimates
Sweden’s krona gained after an index measuring household sentiment rose to its highest in more than two years amid government promises to cut incomes taxes. (SWECCI)
The krona strengthened 0.3 percent against the euro to 8.7447 as of 10:14 a.m. in Stockholm. Versus the dollar, the Swedish currency rose 0.4 percent to 6.3251.
The consumer confidence index climbed to 102.0 in October from a revised 97.9 the previous month, the Swedish National Institute of Economic Research said in a statement today. That beat the 98.5 median estimate in a Bloomberg survey of 10 analysts. A gauge of manufacturing confidence rose to a 17-month high of 101.2 from a revised 94.5 and compared with analyst expectations of 96.2.
“Households have become more positive about both their personal finances and the Swedish economy,” NIER said. Manufacturing “orders from the domestic market have risen in recent months, while export demand has softened somewhat. Employment is expected to fall further, but the percentage of firms anticipating cutbacks is smaller than before.”
Sweden’s government last month said it will cut income taxes next year for a fifth time since coming to power in 2006 to support a recovery in the $540 billion economy. The central bank yesterday it will underpin demand by keeping its main lending rate unchanged at 1 percent until late next year.
“The improved confidence should support households’ willingness to spend; we also expect to see good income gains and low inflation ahead, which will boost household’s real purchasing power,” said Andreas Wallstrom, an analyst at Nordea Bank AB in Stockholm, in a note. “It is hard to be anything but optimistic on private consumption going forward.”
The euro-zone emerged from a record-long recession in the second quarter, expanding for the first time since 2011. That’s good news for Sweden, which sells about half its output abroad, of which about 70 percent goes to Europe.
Swedish economic growth will accelerate to 2.6 percent next year from 0.7 percent in 2013, while unemployment will fall to 7.8 percent from 8 percent, the Riksbank predicted yesterday.
Improved consumer and manufacturing confidence ’’suggest upside risks to Swedish GDP growth going forward compared to the Riksbank’s GDP growth estimates,’’ said Martin Enlund, an analyst at Svenska Handelsbanken AB in Stockholm.
Swedish credit growth held at 4.8 percent for a third month in September, Statistics Sweden said today. That’s the highest level since the start of last year, fueling concern of a housing bubble after apartment prices rose 14 percent in the 12 months through August.
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