Swedish exporters, a backbone of the Nordic state's economic resilience, are at their gloomiest for more than two years and see the strong crown hitting profitability, a survey showed on Thursday. The crown is close to 12-year highs against the euro, benefiting from Sweden's image as a safe haven with solid government finances amid the euro zone chaos.
Exports account for about 50 percent of Swedish economic activity, and more than half of those goods go to the European Union. Nevertheless, the economy has performed surprisingly well given the euro zone debt crisis with gross domestic product (GDP) up 1.4 percent in the second quarter.
A survey of 22 companies by the Swedish Trade Council, an export promotion group, showed a drop in its export managers index to 48.2 for the third quarter from 54.8 in the second quarter, meaning exporters expect a slowdown. A separate index on expected export profitability fell to 41.4 from 54.9. "I guess that this is to do with the strengthening of the crown, I cannot see any other reason for it," said Mauro Gozzo, chief economist at the Council.
The last time the export managers index was below 50, which indicates export growth, was at the height of the last slump in late 2008 and early 2009, the survey showed. Some sections of industry, notably the timber sector, have called for the central bank to cut rates from their current level of 1.50 percent to soften the stronger crown have also been made. The bank next meets on September 5 with a decision announced the following day.
Investment bank SEB said it expected the Riksbank to cut rates in two weeks, citing lower international growth, more expansionary policy from other central banks and the crown. "While we acknowledge there is a risk that the Riksbank may prefer to postpone its rate cut until October, we regard current market pricing as underestimating the likelihood of a September cut," the bank said in a research note.