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Sweden’s economy experiences unexpected inflation boost attributed to Beyoncé's concert in Stockholm
The Swedish economy witnessed an intriguing phenomenon in May, as core inflation figures revealed a less-than-expected slowdown. Analysts are now attributing this peculiar trend to the overwhelming presence of Beyoncé fans, who flocked to Stockholm for the pop icon's world tour. Data released by Statistics Sweden indicated an 8.2% rise in a price measure that excludes energy costs and interest-rate changes compared to the previous year. This surpassed both Bloomberg's median estimate of 7.8% and the 8.1% projection by the Riksbank. Danske Bank economists suggest that the surge in hotel and recreation prices can be attributed to the influx of visitors attending Beyoncé's world premiere at Stockholm's Friends Arena, where she captivated over 80,000 attendees across two nights. However, experts anticipate a reversal of this inflationary impact in June as hotel and ticket prices normalize. Despite this temporary blip, Danske Bank maintains its outlook for the Riksbank to raise interest rates due to the weak Swedish currency and persistently high inflation levels.
Glenn Nielsen, an economist at Swedbank, noted that while Beyoncé's concerts may have contributed to the surge in accommodation costs in May, the significant price increases were not solely attributed to that event. Nielsen highlighted that the strong demand and high cost pressures in general have given hotels the incentive to raise prices across various segments.
This occurrence takes place amidst a global backdrop of easing price pressures. Recent data revealed a slowdown in US inflation to its lowest level since March 2021, while consumer prices in the euro zone also rose less than anticipated in May.
However, Swedish prices continue to rise at a much faster pace than the central bank's target, posing a challenge for the Riksbank. The weakness of the Swedish currency further complicates matters as it hampers the bank's efforts, leading to higher costs for imported goods—a situation similar to that experienced by neighboring Norway.
The recent decline of the Swedish krona to near all-time lows against the euro has heightened the urgency for the Riksbank to maintain a higher benchmark rate compared to the European Central Bank (ECB). The ECB is widely expected to raise its deposit rate to 3.5% on Thursday, aligning it with the Riksbank's rate. The Riksbank has signaled its intention to increase rates again later this month or in September.
Most economists anticipate that the Riksbank will announce a quarter-point rate hike on June 29, and the latest inflation data supports this expectation, regardless of any temporary influence from the Beyoncé blip. The May inflation figures exceeded expectations and were higher than anticipated, indicating a broad-based upturn. This reinforces the belief that the Riksbank will proceed with rate hikes in June.
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