NEWS / Foreign Exchange

Sweden: Softer labour market and trade balance

• Q1 GDP growth may be weaker than generally expected

March unemployment surprised by not showing any decline compared to the previous month, but stayed at 4.8%. The reason does not seem to be declining AMS measures which count as employment, but such an effect may come later. The labour force and employment grew by 1.1 and 1.7 % yoy respectively. This means that the difference narrowed somewhat compared to the past couple of months, which we interpret as a moderating pressure on labour resources. Measured as hours worked, unused labour supply was 10.8% in March, an indication that there is still a lot of free labour resources that are not captured by the official definition.

March trade balance was marginally weaker than expected, showing a SEK 14.6 bn surplus. More importantly, however, is that the surplus was SEK 6.2 bn smaller than year-ago. This to a large extent confirms our view that net exports will give a significant negative contribution to growth in Q1, in the order of 2 percentage points. We believe that this factor may have been underestimated by many forecasters and that there may be reasons to revise down Q1 GDP forecasts on the back of this.