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EXPLAINED: How could Sweden’s latest inflation news affect your finances?

Lower inflation and falling food prices are welcome news for many people in Sweden who have been feeling the pinch over the last few months. So, what does this mean for your personal finances?

EXPLAINED: How could Sweden's latest inflation news affect your finances?
Lower inflation in April could make a key interest rate hike in June less likely. Photo: Fredrik Sandberg/TT

Has inflation peaked?

CPI inflation – inflation measured using the consumer price index – has now decreased for the second month in a row, with yearly inflation dropping in March to 10.6 percent from 12 percent in February, and again in April to 10.5 percent.

According to Alexandra Stråberg, head economist at Länsförsäkringar, in comments to the TT newswire, Sweden has “absolutely” passed the peak of inflation, and is also very close to passing the peak of interest rates.

“This is good news,” she told TT. “It’s very positive that core inflation, which is when energy prices are removed, went down more than expected.”

Core inflation fell to 8.4 percent in April compared with 8.9 percent in March. This was lower than expected – the average prediction from analysts for April was 8.7 percent, according to a Bloomberg comparison.

Fruits and vegetables cheaper

Although inflation has decreased two months in a row, this doesn’t mean we’re likely to see prices dropping back to the levels seen at the beginning of last year any time soon, it just means that they will not go up as quickly as they have been doing.

That doesn’t mean that prices won’t go down at all, though – April was the first month to see a drop in food prices since November 2021, with a dip of 1.2 percent in April compared to March.

Fruit and vegetables saw the largest price decreases, falling 3.9 percent and 5.4 percent respectively in April. Despite this, food prices were still 17.5 percent higher in April than 12 months ago.

Cucumbers in particular saw a drop of 31 percent in a month, with a 5 percent drop in the last 12 months.

This could also be related to the seasons – produce grown in Sweden is becoming more available as we move closer to summer, meaning that consumers aren’t paying for produce imported from abroad which is more expensive due in part to the weak krona.

Sweden’s supermarket chains Ica, Coop and Lidl also lowered and froze food prices at the end of March and throughout April, which will have contributed to these figures. These should stay low this month – Ica and Lidl both pledged in late March that this would continue for at least two months.

Good news for homeowners

Homeowners with mortgages are no doubt acutely aware of high interest rates at the moment, with many of our readers getting in touch this year to tell us how their finances have been affected.

Sweden’s key interest rate, set by the central bank, the Riksbank, was raised to 3.5 percent, the highest since 2008, at the end of April, with the bank warning of a further hike of 25 points at its next meeting in June or the meeting after that in September.

Although a drop in inflation doesn’t immediately translate into lower interest rates, it does mean that there’s a higher chance that key interest rates won’t be hiked in June, as it indicates that the Riksbank’s measures to bring down inflation are starting to have an effect.

“The Riksbank has said that it is considering raising rates in either June or September, and this result is good news that could mean the Riksbank decides not to raise rates in June,” Stråberg told TT.

“But that depends if the inflation figures before the Riksbank’s next meeting in June are also positive.”

Rental costs and fees to housing associations (BRF fees) also contributed to lower inflation figures last month, although there could be a delay in changes to BRF fees in particular which could cause issues in the near future.

“It suggests that there haven’t been a lot of concluded rental agreements. Some BRFs could raise fees in line with the Riksbank’s hikes to key interest rates, giving us a delayed effect,” Carl Nilsson, an economist at Swedbank specialising in inflation, told TT.

Nilsson agreed that the inflation figures were positive, although Swedbank’s prognosis that the Riksbank would raise interest rates in both June and September remained the same.

“There will be another inflation figure and there’s a risk that CPI can return a nasty surprise,” he told TT.

Krona remains weak

After April’s inflation rate was announced in mid-May, the krona dropped by around 5 öre against the Euro, indicating that the krona is likely to remain weak for some time.

This is bad news for those who earn in Swedish krona but have expenses abroad, as their salary will not stretch as far is it would have before the krona lost value.

On the other hand, it’s good news for many of our readers living or owning property in Sweden who earn their salary elsewhere, as they will likely be able to buy more in Sweden for the same amount of money in their home currency.

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Why few companies in Europe are hiring workers from abroad despite shortages

Companies across Europe are in need of workers but a lack of mobility for workers across the European Union means most do not recruit from abroad. The EU is making moves to remedy the situation.

Why few companies in Europe are hiring workers from abroad despite shortages

European companies, especially smaller ones, are suffering from labour and skill shortages, more than their British and American counterparts, a recent survey has shown.

But while they are more likely to hire from abroad than American and Canadian companies, the proportion of those seeking foreign workers remain small.

A Eurobarometer survey carried out among small and medium-sized enterprises (SMEs) has found that in most European countries finding staff with the right skills is the biggest problem, more important than bureaucracy, unfair competition or access to finance.

The European Commission says the problem has grown over the years and affects all sectors of the economy. The harder-to-fill roles are those requiring vocational training qualifications, while it is less difficult to find staff for jobs requiring bachelor’s and master’s degrees. SMEs struggle in particular to find technically trained staff such as lab-workers and mechanics.

In the past two years, 61 percent of micro companies (with less than 10 employees) and 80 percent of medium-sized one (between 50 and 250 staff) experienced difficulties hiring staff with the right skills. In Denmark and Sweden micro companies seem to have less problems, as 45 percent and 37 percent respectively said they struggled. On the other hand, almost all medium-sized enterprises in France and Switzerland (96 percent and 95 percent) had difficulties, while the proportion was 85 percent and 84 percent respectively in Spain and Sweden, and much lower in Italy (59 percent).

The survey involved some 19,350 SMEs including also non-EU countries such as Norway, Switzerland, the UK, the US and Canada.

When looking at ways to plug staff shortages, 30 percent of European SMEs looked to recruit abroad. The proportion was higher for the UK (33%), but lower for the US (15%) and Canada (11%).

Some 14 percent of European SMEs reported hiring staff from other EU countries, a proportion that reached 40 percent in Austria and 22 percent in Denmark, but was as low as 7 percent in France. On average, 16 percent of SMEs reported hiring from outside the EU, with proportions ranging from 11 percent in Sweden, 12 percent in France and Denmark, 13 percent in Spain, 17 percent in Germany and 21 percent in Italy.

While recruitment within the EU is easier thanks to free movement rules, only 50 percent of SMEs reported not having had problems in this regard. Otherwise, languages and to a lesser extent administration were identified as the main obstacles to recruit staff across the EU.

In a recent analysis, BusinessEurope, the confederation of industry associations in Europe, said that labour and skills shortages are due to “demographic change; high rates of inactivity; and relatively low levels of intra-EU mobility”.

The European Commission has recently proposed to make the recognition of professional qualification easier and to create an EU Talent Pool, a scheme to match European companies with non-EU jobseekers.

The EU is currently also reviewing rules to make it easier for third country nationals residing in the EU long-term to move within the bloc in the attempt to make the EU a more appealing work destination.

BusinessEurope Director General Markus J. Beyrer said commenting on the Talent Pool: “It is high time that the EU acknowledges the role of economic migration in helping to address Europe’s labour and skills needs”.

“The proposed Talent Pool can be a game changer in making Europe a more attractive destination for the needed skilled workers from third countries around the world. Helping to match skilled third-country nationals with the most pressing shortage occupations is an important approach.”

A survey among BusinessEurope members has shown that 78 percent of companies view mobility and migration favourably to resolve labour and skills shortages.

More information on each country’s situation is available here.