Swedish household confidence hits highest since 2021 as economic sentiment rises

Swedish households reported the highest level of confidence in nearly five years in September, according to the National Institute of Economic Research (NIER). This surge in household confidence, now at 102.2, coincides with a strengthening overall economic sentiment, which stood at 107.1 in the same period. The indicators have reached their highest levels since December 2021 and above their historical averages.

The rise in household confidence was primarily attributed to households' self-assessment of their finances and the Swedish economy compared to the previous year. Business confidence also strengthened for a sixth consecutive month, reaching 109.3, and is now approaching a very strong level. Similarly, construction confidence rose to 102.9, reflecting improved order books and optimistic hiring plans among companies.

The service sector showed a positive trend as well, with a sentiment score of 107.1, boosted by a more favorable view of demand, especially for the upcoming three months. However, manufacturing confidence remained relatively stable at 106.3. While production expectations remained well above normal, some companies reported having excess inventories of finished goods, which tempered the positive momentum.

Despite this, trade confidence eased slightly to 112.1 from 113.7, yet it remained significantly above normal, with the strongest sentiment among non-durable goods retailers. Companies continue to anticipate price increases at a higher-than-normal rate, while overall employment expectations suggest that business-sector jobs are likely to increase over the next three months. Hiring plans are above normal in manufacturing and construction but below normal in trade.

Household perceptions of the current inflation rate have decreased to 7.4% in September from 9.2% in August. Likewise, inflation expectations for the next 12 months have also declined to 6.3% from 6.8%. Furthermore, households have raised their expectations for variable mortgage rates across all horizons, with all now at 4%.