Sweden: Unemployment Jump Accompanies Marginal Inflation Rise

Talking Points:

• Sweden’s Inflation Rate increases in January, reaching -0.2%
• Unemployment increases to 8.4%
• USDSEK reaches channel support

In lowering the repo rate from zero to -0.10% last week, Sweden’s Riksbank seeks to elevate both the inflation and employment rates. A baseline reading is provided by January’s data; inflation, while having increased, remains negative while the unemployment rate deteriorated, increasing 1.4%.

Up from -0.3% in December, inflation in January measured -0.2%. Sweden’s CPI however fell by 1.1% over the same time span. With an index of 310.75, the greatest negative impacts came from declines in the price of clothing (-10.9%), transportation services (-9.3%) footwear (-8.6%) and packaged holidays (-7.2%). Absorbing part of the negative impact, increases in the price of wine (+5.3%) vegetables (+4.4%) and rents (+0.6%). A repressed price level however is to be expected in January as seasonal effects take root—post holiday discounts tend to leave retail prices lower.

The labor force did not fare as well as prices at the start of the year. In January 2015, unemployment reached 8.4% as 430K persons found themselves without work. This drop came despite 98K additional persons aged 15-74 finding employment when compared to the first month of 2014. The upsurge elevated employment by 0.9 percentage points bringing the rate to 65.2%. Also increasing, the average number of hours worked per week; reaching 122.1 million, hours worked increased by 2.5 million (y/y).

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