Sweden economy: Quick View – Industry remains subdued

Event

Industrial production declined by a monthly 2.3% in August, according to seasonally and calendar-adjusted data from Statistics Sweden. There was a modest monthly fall in new orders.

Analysis

Industrial production had risen on a monthly basis in both June and July, returning overall output back to its level at the start of 2013 following a weak first half of the year. However, this improvement came to an abrupt halt in August, with output falling by 2.3% over the month and by 7.2% compared with a year earlier. This was a larger contraction than expected, although it was partly a result of a significant upward revision to the July production data. Swedish companies cut back on their production of chemicals, electronics, motor vehicles and pharmaceuticals in August, possibly in an effort to align current stock levels (which have risen since early 2013) with prevailing market demand (which has been subdued).

Industrial output in Sweden rebounded strongly in 2009-10 from an alarming slump at the height of the global downturn, but since early 2011 production has followed a gradual declining trend. That said, although monthly data have been fairly volatile so far in 2013, there are signs of output having stabilised, and looking at the most recent three-month comparison shows production having strengthened by 0.7% in June-August compared with March-May. Mirroring recent developments in a number of other European countries, the August production data showed a moderate pick-up in motor vehicle production, mostly for export. Sweden’s flagship manufacturer, Volvo, is increasing output of its V-60 diesel hybrid model to meet demand for “greener” vehicles, and is rolling out a number of new models in its heavy trucks division (which includes the Mack, Renault and UD brands).

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