NIER’s October business tendency survey was strong and better than expected. Confidence in the total business sector rose to 104.7, the highest level since June 2011. Also, employment plans continued to rise and indicates that the labour market will continue to improve.
Confidence indicators improved in all sector except for private services that edged down to 102.2 from 102.8 in October. We are not worried about the service sector though, as much suggest that domestic demand is improving.
The situation in the manufacturing industry improved in November according to the survey. Order intake from the domestic markets skyrocketed, sub-indices for production as well as production plans are fairly optimistic and companies are more satisfied with the order books. The only bad news is that export orders are still not recovering. Thus, global demand, or the weaker SEK, is seemingly not the explanation for the improvement in the manufacturing industry.
All in all, we see downside risks to the Riksbank’s forecast for Q3 GDP due next Friday. However, the improved sentiment in the business sector suggests that GDP finally will gear up in Q4. It is still rather open whether the Riksbank will cut rates or not in December. However, the improved growth outlook and the improved labour market support our view that the Riksbank will stay on hold.
Details, November Business Tendency survey:
Confidence indicator, manufacturing industry (MCI): 105.8 (Nordea 103; consensus 101; prior 101.7, revised from 101.0)
Confidence indicator, total business sector: 104.7 (prior 103.2, revised from 103.3)
Nordea