BRUSSELS (MNI) – Sweden’s companies expect increased demand and
production, along with relatively low price increases over the coming
six months, according to a Riksbank survey published Friday.

“A majority of the companies interviewed in the survey described
the economic climate as good and said they expected the figures for
demand, production and new orders to continue to improve,” the report
said.

“Nevertheless, there is still considerable uncertainty about the
future, although the risks are lower than in May when the previous
survey was conducted,” it added.

The study results underline the Riksbank’s case for gradual rate
hikes in the coming months.

A strong domestic economy convinced Sweden’s central bank to lift
its repo rate by 25 basis points at its September meeting to 0.75%. At
the same time, it reiterated that the repo rate needs to gradually
normalize.

“Most companies expect the economic climate to continue to improve
over the next six months,” today’s Riksbank survey said.

“The upturn in economic activity is broad, with clear improvements
in the manufacturing industry, the construction sector and many
services, while the situation remains positive for the retail trade,” it
said.

But the companies that took part in the survey cautioned that the
“risk of an international downturn” meant that they “remain guarded with
regard to changes in the state of the economy.”

The Riksbank’s policymakers are struggling to balance a strong
domestic economy with the uncertainty that is currently characterizing
the global recovery. As a small and open economy, Sweden’s outlook is
heavily affected by developments in the rest of the world.

The Riksbank survey said companies saw a “moderate” level of
investment over the coming six month with most manufacturing companies
investing not to expand production, but rather to replace worn out
machinery.

“The price increases that the companies plans to introduce over the
next 12 months are expected to be relatively low,” the survey said.

“The companies report that higher material and purchasing costs,
increased demand and the need to raise their own margins are the factors
that will have the greatest impact on prices,” it added.

The Riksbank survey was based on interviews with around 60
companies in the construction, retail, manufacturing and service
sectors.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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