Another set of terrible survey data in Sweden yesterday, which saw consumer sentiment dropping further to -7.4 from -2.9, and with the Economic Tendency survey declining to 86 from 92.7 in October. The trade balance, meanwhile, held up well, coming in at SEK8.0bn, up from SEK6.8bn in the previous month (exports +20% over past 3mths, imports +15%). Surprisingly the sentiment/survey data did not impact much on front-end rates, which still are largely priced for a 50% probability of a cut on Dec 18th. Hence, the rates market for once seems to be pricing in not enough protection against rate reductions in Sweden. Indeed, judging by the Economic Tendency survey, the Riksbank’s Q3 GDP forecast of 0.5% YoY might be overly optimistic, with the survey suggesting even a negative YoY cannot be ruled out (see figure 1). Having said that the Tendency survey has a ‘tendency’ to overestimate troughs and peaks in GDP growth, evident in the chart below, suggesting it is also capturing a great degree of sentiment as well as actual activity data.
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Deutsche Bank