Sweden and Norway

Research evidence excerpt

Allan Monks (44-20) 7134-8309

J.P. Morgan Securities plc

Sweden and Norway

Swedish growth looks firm as core inflation surprises

to the upside again

Riksbank in no rush to hike, but odds of a 4Q tightening remain high

Norges Bank on hold next week, barring a large

upside surprise in next week’s CPI...

We expect guidance for a September hike, although

lower inflation creates more uncertainty on timing

The Riksbank shifted to an explicit tightening bias at the June

meeting, flagging an even chance of a hike by year end. Since

then, there has been significant volatility in energy prices as

the risks associated with the US/Iran war have shifted around.

Energy prices remain higher than prior to the war, however

with pricing surveys such as the PMI still suggesting some

indirect effects could emerge.

Growth has also surprised significantly to the upside in 1H26,

with confidence surveys pointing to a clear improvement into

3Q. Inflation has started to overshoot the Riksbank’s forecasts. The ECB is on track for another hike in September,

potentially with more to follow. At the upcoming Riksbank

meeting in August, we expect the Board will maintain its

tightening bias but without expressing any sense of urgency

to hike. We maintain our call for a December tightening, with

both recent growth and inflation developments supporting

that view.

Since our last publication, several sources suggest that Sweden's underlying growth momentum remains strong despite

geopolitical turbulence. According to the flash quarterly GDP

indicator, economic activity expanded 5.7%q/q, saar in 2Q

(2.5%oya). A good chunk of that reflected payback following

a weak reading in 1Q, but the outturn still beat our aboveconsensus forecast (4%q/q, saar). Looking at the first two

quarters of the year together – a fairer gauge of recent

momentum – GDP averaged 2.6% annualised.

We suspect that strength will moderate somewhat in 3Q, but

the early signals from the soft data have been promising.

Although July’s composite PMI slipped 2.2pts to 54.7, a

three-month average that smooths through volatility remains

consistent with annualized GDP growth of 2.2%. July’s NIER

…