Instant view
Production in the manufacturing industry dropped in December, but somewhat less than we had expected. Production was down 1.0% m/m after the upsurge by 5.5% in November.
The fluctuations in recent months are to a large extent driven by computers and electronics. Talking about temporary effects, production in the petroleum industry increased in December, but only by 2.3% and was still down by 21% y/y. Thus, there still seems to be scope for a recovery in the petroleum industry after the planned production stop.
The order intake was boosted by government’s orders for military aircraft (JAS, SEK 16bn), also that as expected. This will eventually result in production, but over a very long time horizon. So, the upsurge in orders says little about manufacturing industry for 2014 and 2015.
Most important in today’s data is the unexpected drop in production in the service sector. Production was down by a full 1.5% m/m and also declined by 0.5% y/y. This was far below forecasts (+2.0% y/y). The service sector stands for 50% of GDP and underline downside risks to forecasts on Q4 GDP.
All in all, looking through the volatility in the figures for manufacturing industry, the production reading was decent and a recovery seems to be on the way. More worrying is the drop in the service sector production, although one should remember that these figures are volatile too. We are confident that GDP growth will pick up going forward, but much suggest that Q4 GDP growth will be clearly lower than the Riksbank call at 0.7% q/q. We expect the Riksbank to stay on hold next week. The sluggish production data suggests that the Riksbank will most likely keep the near term easing bias in the rate path.
Details, December
Manufacturing
Production y/y: 0.1 % (Nordea -0.5%; consensus 0.8%; prior 3.2% revised from 3.5%)
Production m/m: -1.0 % (Nordea -1.5%; consensus -0.5%; prior 5.5% revised from 5.7%)
Order intake y/y: 14.7 % (prior -0.6% revised from -1.4%)
Order intake m/m: 15.4 % (prior 3.4% revised from 2.9%)
Private services sector
Production y/y: -0.5% (Nordea 2.0%; consensus 2.0%; prior 1.3% revised from 0.9%)
Production m/m: -1.5% (Nordea 0.5%; consensus 0.4%; prior 0.3% revised from 0.5%)
Nordea