Sweden: Core downside surprise shapes VAT impact view – Danske Bank
|Danske Research Team reviews Sweden’s March inflation, highlighting a downside surprise in core inflation and energy, driven by a sharper-than-expected fall in electricity prices and broad food price declines. The team notes particularly weak dairy prices due to lower global prices and last year’s stronger currency, and still expects the full effect of April’s lowered VAT to show in upcoming food price data.
Energy, food and VAT effects in focus
"Final figures for March inflation confirmed the downside surprise in core inflation and energy. The larger decline in energy was attributed to a steeper fall in electricity prices than anticipated, while fuel prices surged as expected. Within services, holiday-related prices fell, accounting for most of the surprise in this category. "
"Food prices fell broadly and more than they usually do given the season. The decline was most prominent in dairy products, reflecting lower world prices and a stronger currency last year. "
"Even with the low March figure, we still expect full effect on food prices from the lowered VAT in April, and data from Matpriskollen confirm this view."
"It is important to note that Matpriskollen measures prices differently from Statistics Sweden, as it does not account for offers or sales campaigns, which Statistics Sweden does."
"However, since the reduced VAT impacts regular prices, Matpriskollen's predictions are likely to be more accurate than usual."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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