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Increasing number of households in Sweden unable to pay bills

The number of debt collection cases in Sweden has increased during the ongoing cost of living crisis with more households at risk of being able to pay bills.

Increasing number of households in Sweden unable to pay bills
A higher number of unpaid bills were referred to Swedish debt collection agencies in late 2022, an organisation for the sector said. File photo: Jessica Gow/TT

Households that were on the margins of being able to make ends meet are increasingly likely to be unable to pay bills.

The situation is reflected by an increasing number of outstanding bills referred to debt collection agencies in late 2022, news wire TT writes.

“Unfortunately, this is the consequence of the very large increases in costs for households,” Fredrik Engström, lawyer and chairperson of industry organisation Svensk inkasso (Swedish Debt Collection) told TT.

“Those who were already on the margin before are now having a very difficult time and many have suffered with payment difficulties,” he said.

Electricity bills in winter months can be some of the most difficult to pay for households, and inflation and high gas prices in late 2022 have made the cost of heating and electricity higher than usual.

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Debt collection company Intrum now receives between 10 and 15 percent more debt collection cases for energy and electricity bills compared to a year earlier, TT writes.

Engström said that no dramatic increase in energy bill debts in particular had been seen during the autumn, however.

This may be due to those bills being prioritised over others, he added.

“You don’t want to risk the heat being turned off,” he said.

“There is a natural order of priority which households that have difficulty paying bills tend to follow. Rent, electricity and telephone bills usually come first,” he said.

Other late payments that might be referred to collection agencies can include both large and small loans as well as rolling costs like gym membership, broadband or other subscription fees.

Although Intrum has noted an increase in debt collection cases, Swedish consumers so far have shown a relatively good ability to withstand the cost of living crisis when it comes to paying bills according to Morten Trasti, chief analyst at Intrum Scandinavia.

This may be due to unemployment in Sweden remaining relatively low and many households having had the opportunity to save during the Covid-19 pandemic.

“If you compare the general case inflow today with how it looked during the same period before the pandemic, the number of debt collection cases has also decreased by approximately 7 percent” Trasti said.

The numbers are similar to those from March 2020 and the trend is comparable in Norway and Denmark, he added.

In September last year, Svensk inkasso asked its approximately 40 members if they had seen an increase in referrals in line with rising prices. Half of the companies said they had seen an increase of around 10 percent.

Engström said he would not be surprised to see a similar increase at the beginning of 2023.

“If the situation on the labour market gets worse, more Swedish households could have payment problems,” Trasti said.

“That is key for how the situation develops in future: how much unemployment rises,” he said.

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MONEY

‘Swift and Eurovision’: Swedish inflation fell less than expected in May

The year-on-year inflation rate fell to 3.7 percent in May, according to new figures from Statistics Sweden.

'Swift and Eurovision': Swedish inflation fell less than expected in May

This is a drop of just 0.2 percentage points in so-called CPI inflation since April. Experts had predicted that inflation would fall by twice as much, to 3.5 percent.

“This is a setback,” Alexandra Stråberg, chief economist at Länsförsäkringar, told the TT newswire.

According to Statistics Sweden, inflation in May was primarily affected by increased housing costs, mainly due to rising interest rates for household mortgages, which pushed up the inflation figure. This was mitigated by some extent by lower electricity, and fuel prices have also had an effect.

“The inflation rate fell in May, even though most service prices increased,” Statistics Sweden statistician Caroline Neander said in a press statement. “It was electricity prices which mainly contributed to the decline.”

Month-on-month, May saw a rise in the prices of transport services – like car rentals, train travel and flights – as well as increased prices for hotel stays, package holidays and food.

This could be due to two major events which took place in Sweden in May: Taylor Swift concerts in Stockholm and the Eurovision Song Contest in Malmö.

“There could be a temporary Swift or Eurovision effect here,” Stråberg said.

The head analyst from Nordea, Susanne Spector, said that this could partially explain the rise, but added that it wouldn’t explain the rise in the cost of services too.

“That’s a risk factor for the central bank,” she told TT.

What does this mean for interest rates?

On June 27th, Sweden’s Riksbank central bank is set to make its next announcement on Sweden’s key interest rate, just one month after it lowered the rate for the first time in eight years.

Even before these inflation figures were announced, Riksbank governor Erik Thedéen made it clear that the bank is not planning on lowering interest rates, stating there would need to be “very large changes” to even begin to discuss it in June – and unexpectedly low inflation figures for May would not be enough on their own.

Now that inflation rates have dropped less than expected, it looks even less likely that the Riksbank will lower the key interest rate in two weeks’ time.

Spector from Nordea believes that the next interest rate drop will be in the autumn.

Länsförsäkringar still predicts three further drops to the interest rate this year, although Stråberg said these figures had increased the likelihood of the bank only cutting the rate twice.

“It depends on next month. There are a lot of months to go which need to confirm the fact that inflation is on a downward trajectory,” she said.

According to chief economist Robert Boije, the most important takeaway from the new figures is the fact that year-on-year inflation did not rise.

“Today’s inflation figures for May from Statistics Sweden don’t give any reason not to believe the conclusion that the spectre of inflation in the Swedish economy has been vanquished,” he told TT.

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