Swedish IP Edges Up in February But Is Still Weak

Industrial production rose by 0.2% in February after declining for two months in January and in December 2021. Manufacturing output has declined in only one of the last three months falling by 0.9% in January flanked by minor increases of 0.2% or less in December 2021 and February 2022.

Data for three key industries in Sweden show mixed trends. For food beverages and tobacco, there is a steady deceleration as growth drops from 5.4% over 12 months to a pace of 3.9% annualized over six months to -6.8% over three months. However, for textiles, the pattern is irregular with the declines over three and 12 months versus a solid increase over six months. For motor vehicles, there's a 16.4% decline over 12 months, a 7.2% annual rate of decline over six months followed by a 7.1% decline over three months. That marks a technical acceleration even though all the growth rates are negative.

Sector weakness trends are mostly mixed: intermediate goods show a mixed pattern but with 12-month growth and three-month growth nearly the same at -3% annualized. Investment goods also show a mixed trend but with the 12-month declining pace at -1.8% and the three-month annualized decline at -1.7%. Nondurable consumer goods output shows an ongoing deceleration from a 14.7% annual rate increase over 12 months to a 6% pace over six months to a declining pace at -13.2% over three months. Consumer trends have pulled back steadily and sharply.

Quarter-to-date trends for Sweden show at a -3.9% annual rate of decline; that's for two of three months hard data in the first quarter. Manufacturing output is falling at a 4% pace in the quarter-to-date. By industry, there are declines in the quarter-to-date of 7% for food, beverages & tobacco and of 9.3% for textiles although for motor vehicles there is an increase at 11.6% annual rate. Sectors show declines throughout with intermediate goods falling at a 1.8% annual rate, investment goods at a 4.2% annual rate, and nondurable consumer goods at a 4.5% annual rate.

Comparing output to January 2020, before the virus had struck most places, overall industrial production excluding construction has risen by 2.2% on that timeline; manufacturing is up by 2.8%. On that same timeline, output in all three industries in the table is lower and two of the sectors are lower: intermediate goods and investment goods. The overall result for manufacturing has been pulled up by nondurable consumer goods where output has advanced by 18%.

Inflation data are also contained in this table as a point of reference. Inflation continues to accelerate from 4.4% over 12 months to 5.9% over six months to 6.3% over three months. The core rate also accelerates from 2.8% to 4.2% to 5.4% on the same timeline. Sweden is caught up in the global inflation problem.

Sweden's manufacturing sector is showing growth year-over-year; however, performance is not uniform and is being driven by nondurable consumer goods production. Over three months, that support turns to weakness and manufacturing output is declining. These data are up-to-date through February when the invasion of Ukraine began. We can expect that with, the economic sanctions on Russia in place and other disruptions going on in Europe, we will see weaker data in the period ahead. As for the impact of the virus in Sweden, infections spiked to their all-time high in January and they have been receding in February and stabilizing in March. Deaths in Sweden peaked in early-February; they continue to decline to historic lows as of late-March.