On the other hand, Sweden is in a much better initial position than many other countries. Sweden’s public finances are in good shape and, unlike some other countries; Sweden did not suffer a significant downturn on the housing market in connection with the financial crisis of 2008–2009. It is rather the case that the Swedish economy grew so quickly during the major part of last year that there was a risk of overheating and rising inflationary pressures. The companies reported rising labour shortages, and other measures of resource utilisation in the economy also increased. There were periods during the year when several indicators were higher than normal. However, there has been a turnaround in these indicators over the last few months. Company surveys show that labour shortages are no longer as acute in most sectors. Capacity utilisation in the manufacturing industry has declined and is somewhat lower than the historical average. Other indicators, such as unemployment and the employment rate, also point to more spare capacity than normal in the economy. My assessment was therefore in line with the overall analysis in the February Monetary Policy Report, that is that resource utilisation in the Swedish economy had declined and was below a normal level at the end of last year. This is shown in Figure 8. I therefore think that there is very little risk of overheating at the moment. BIS central bankers’ speeches  9  Figure 8.
At the same time, the decisions by the ECB in December and in February to offer the banks in the euro area three-year loans against collateral have helped to stabilise the situation on the financial markets. So, although the situation in Europe is still problematic, we can see that progress is being made at approximately the rate the Riksbank has estimated. In such a scenario we can expect to see a recovery in the euro area, although a weak one, over the next few years. Poorer performance abroad leading to slowdown in Sweden The weak performance in Europe at the moment is affecting the Swedish economy in several ways. First, the demand for Swedish exports is falling. This was also the main reason why growth slowed down in the economy at the end of last year. Second, household and corporate confidence in the economy is falling and this in turn is leading to a slowdown in consumption and investment. The financial situation in Sweden is also affected by developments abroad. The fall in share prices in 2011 reduced the financial wealth of the households, which contributed to an increase in saving. It is unlikely that there will be any significant decline in saving in the period immediately ahead as the low level of growth is expected to reduce employment and increase unemployment.