Low core inflation masks signs of rising goods price pressure in Sweden

Final inflation figures largely confirmed the flash estimate, with a small upward revision to core inflation to 0.54% y/y from the preliminary 0.53%. CPIF came in at 1.48% y/y and CPI at 1.15%. The flash estimate surprised to the downside, with lower services inflation driving core inflation below the consensus estimate and our forecast. The details revealed that the surprise stems mainly from a few categories. Car rental fell by 28.9% m/m, had a surprisingly large impact and contributed -0.2 pp m/m to CPIF in September, which is larger than usual for the month. Another item that stood out was insurance, which fell by 2.9% month-on-month. The effect is quite small, contributing only -0.027 percentage points to CPIF, but the decline is unusual.

Goods prices excluding food and energy rose more than is normal for September, despite IKEA having announced price cuts from 1 September. There are no official figures for IKEA's weight in the furniture component of the CPI basket, but it is assumed to be high. However, there was no sign of price cuts, and furniture prices rose by 1.7% m/m. Prices of information and communication equipment rose by 4.1% m/m, which is a larger increase than usual in September. Durable goods prices rose 1.1% m/m, which is higher than usual, and the trend appears to have turned: annual inflation in durables reached 0.9%, the first positive reading in more than a year. The rise was expected, as goods prices tend to follow PPI for rubber and plastic products with a lead of around five months, and that index has been signalling higher prices (see chart). This is likely the first sign of higher global price pressure feeding through to consumer prices, so low core inflation may not be as dovish as it first appears.

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