The confidence indicator has risen for both the manufacturing and construction industries as well as for trade and services industries. New orders in manufacturing have picked up, mainly in the export market but there has also been a clear improvement in the domestic market. Monthly data for foreign trade in goods also indicate an increasingly bright picture for exports. Like the developments elsewhere in the world, the Swedish purchasing managers index for October also showed a positive development. New data for retail sales point to continued relatively strong rises. At the same time, the NIER’s consumer survey for October provides somewhat mixed signals. Households have become slightly less optimistic about the Swedish economy and unemployment, while their expectations regarding their own finances have improved. As regards the labour market, we noted in the October Inflation Report that there were signs of an improvement in the situation. The strengthening of domestic demand and the announced measures in the Budget Bill were judged to lay the foundation for a rise in employment in the period ahead. However, the change in methods in the labour force surveys means that developments in the labour market are particularly hard to interpret at present. Employment growth appears perhaps to have been somewhat stronger than we expected in October. Developments in the number of new job vacancies and redundancy notices also point to an upturn in the labour market. In addition, the NIER’s latest quarterly business tendency survey contained a number of positive signals regarding companies’ hiring plans.
National demand is showing a brisker pace of recovery than initially envisaged, based on the increase in household consumption and investment in equipment over the past two quarters, and on some slowing in the fiscal adjustment following the revision of the adjustment path last summer. In fact, household spending, in a setting of improved confidence resulting largely from the gradual improvement in the labour market and from some recovery in disposable income, is showing moderate growth, despite the fact that the necessary reduction of household debt is still exerting something of a contractionary effect on expenditure. Further, investment in capital goods is looking buoyant, in light of the improved business climate and increased investment activity by exporting firms. The contractionary course of residential investment has slowed, although it remains in negative territory, while the stock of unsold housing remains high. The outlook of progressively improving activity is closely linked to labour market developments, where the benefits of wage moderation and the improved incentives for job creation driven by the recent labour reform are becoming patent. The latest employment figures show a continuation of the positive trend discernible since the second half of 2013. Thus, in recent months, Social Security registrations have continued to increase and the pace of decline of registered unemployment has stepped up. However, on the first-quarter figures for 2014, the unemployment rate remains very high, still close to 26% of the labour force.