Recent Swedish data has been on the softer side of expectations. Sentiment indices fell back in August; there was a worrying dip in the trade surplus and a 5% YoY decline in exports. The August manufacturing PMI also printed sub-50.
“Given the slowdown in Sweden’s key export markets and the strength of the SEK, it looks unlikely that exports can continue to show the same resilience as in the first half of the year. Domestic demand is also likely to be dampened by a weak labor market and signs of slowing credit growth. Hence, early indications are that Q3 is unlikely to match Q2’s stellar performance. This should keep the door open for further rate cuts this year.” adds Burgess.