The Riksbank is cutting its policy rate by 50 basis points. The long-awaited decision was made during Thursday's November monetary policy meeting, with the policy rate now set at 2.75 percent. A welcome announcement, albeit at the latest, says TMF's industrial policy expert, Simon Imner.
Simon Imner - Industrial Policy Expert at TMF. Photo: Juliana Fälldin, Swedish Wood and Furniture Association (TMF).
During the late summer and autumn, the reductions have followed one another, at the same time as experts have called for double reductions to strengthen households' financial situation and counteract the ongoing recession.
'It is clear that the policy rate needs to continue to be lowered to support domestic demand. The inflation target has now been achieved, while growth remains weak, and in the construction industry, redundancies and unemployment continue to rise. Today's double reduction is hopefully just one in a series—continued reductions will be required this winter and into 2025. Otherwise, households risk becoming even more restrained,' says Simon Imner.
October's preliminary inflation rate, measured by the CPI, was also presented by Statistics Sweden this morning and remains unchanged at 1.6 percent. The CPIF was 1.5 percent in October, compared with 1.1 percent in the previous month.
'Inflation is rising slightly more than expected according to preliminary figures, but it is still below the inflation target. We are following developments closely, but at present, we do not see that it affects the Riksbank's rate of cuts,' says Simon Imner.
The mood in the construction sector is worse than usual. The confidence indicator for building and civil engineering decreased by 1.1 points in October and now stands at 94.2. The decline can mainly be explained by a weaker order backlog flow among building construction companies. Four out of five house-building companies report that insufficient demand is hampering increased construction. The low construction levels are now starting to spread in the construction sector, where the latest edition of TMF in Figures showed a clear decrease in order bookings for building equipment companies.
Among households, on the other hand, sentiment is above normal for the first time since December 2021. The confidence indicator increased by 1.6 points to 101.3, marking an increase for the thirteenth consecutive month. However, it should be emphasised that households remain restrained, with plans for home renovations and home purchases rising only marginally compared to the previous survey. In general, households have a negative view of their own finances but are beginning to look upwards with a much more positive outlook than the historical average.
'Both households and housing production need help to get out of the ongoing construction crisis. The indications that insufficient demand is holding down construction highlight the need for stimulus measures to increase demand. That is why it is so important to stimulate demand, such as the committee proposals on adjustments to mortgage caps and amortisation requirements that were recently presented to the Minister for Financial Markets, Niklas Wykman,' says Simon Imner.
More information:
TMF
[email protected]
www.tmf.se