Households’ disposable incomes fall, consumption declines, construction investments fall sharply. The Swedish economy is expected to enter a recession in 2023.
The mood in the Stockholm economy is still much gloomier than normal, shows the latest report from the Stockholm Chamber of Commerce.
For the first quarter of 2023, the Stockholm Barometer, which the Stockholm Chamber of Commerce makes in collaboration with the Norwegian Economic Institute, shows a positive change in the economy, albeit a marginal one. Before that, the Stockholm barometer declined six quarters in a row.
– But it is too early to say that we see the light at the end of the tunnel. We don’t know if this is a turnaround. We have a recession to look forward to that households and companies have not yet seen the full effect of, says Andreas Hatzigeorgiou, CEO of the Stockholm Chamber of Commerce.
By the end of the first quarter of 2023, high inflation began to moderate somewhat as prices for energy, transport, raw materials and key inputs have fallen. But despite that, inflation remains high and both companies and households are pressured by increased costs in the form of increased prices and rising interest rates.
Households’ real disposable income is expected to fall during 2023, which means that consumption is assumed to decline significantly. At the same time, construction investments are expected to fall sharply, which is also a driving factor in the GDP decline in 2023.
– If construction continues to fall, we risk a negative spiral. New production is falling like a stone, with a halved number – or even fewer – construction starts in the Stockholm region. Now the politicians must act.
Despite the worse economy, companies continue to hire. In the first quarter of 2023, seven industries and sub-industries reported that they increased their workforce during the quarter, while three reported that they decreased their workforce.
The households’ gloomy view of their finances is a sign of concern, the risk is that it will last for a long time, perhaps into 2024, says Andreas Hatzigeorgiou.
The labor shortage decreases in a recession, according to the Stockholm barometer, but part of it is of a structural nature and stems from a poor match between companies’ demand and the supply of job seekers. The labor shortage is particularly large in Stockholm, among other things a consequence of a dysfunctional housing market that makes it difficult for companies to recruit and provide comprehensive skills.
In the construction industry, companies in construction activities keep the mood up, while there are significantly more gloomy tones among companies in house building.
– In order to avoid an excessive decline and thereby risk losing competence and resources for construction, the state and the municipalities could increase the pace of other types of investment, says Andreas Hatzigeorgiou.
For example, he believes, one could review whether it is possible to bring forward construction projects in the region and the municipalities or speed up maintenance and new investments.
For trade in Stockholm, the mood is much weaker than a historically normal situation. It is also the sector within Stockholm’s business life that is doing the weakest.
– Trade in Stockholm is having a very tough time right now. Households’ high costs mean they have to prioritize hard, says Andreas Hatzigeorgiou.
According to him, trade employs many people and is often a gateway to working life.
– If trade continues to cut down on staff, we risk exacerbating a social problem.
Households’ attitude to their own finances and Sweden’s economy has brightened somewhat. But despite the upswing, the assessment remains that households are very pessimistic about their own finances
