Decreased price pressure in the service sector

Fresh purchasing manager figures show a certain recovery in the service sector. At the same time, the price increase pressure continues to decrease. It is pleasing for the Swedish Central Bank that we see more signs that service inflation is on its way down, says Swedbank economist Jörgen Kennemar to TT.

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Decreased price pressure in the service sector
Photo: Michael Sohn/AP/TT

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Fresh purchasing manager figures show some recovery in the service sector. At the same time, the pressure of price increases continues to decrease.

It is pleasing for the Swedish Central Bank that we see more signs that service inflation is on its way down, says Swedbank economist Jörgen Kennemar to TT.

The purchasing manager index for the service sector rose to 51.8 in June, according to the monthly measurement made by Swedbank and the purchasing manager organization Silf. This can be compared to the revised 49.8 in May.

The increase was unexpectedly large. Analysts had counted on the index rising to 50.5 in June, according to Bloomberg.

A index value above 50 indicates increased activity in the sector.

The index returns to the growth zone after being slightly below in recent months. But it is still quite sluggish and no real boost in the upturn, says Jörgen Kennemar, responsible for the analysis of the purchasing manager index.

Lower price plans

The index for raw and input material prices fell to 53.7 from 54.2 in May, which is the lowest level in a year. This means that the pressure of price increases in the service sector decreased further in June.

It is an effect of the continued slow recovery in the service sector. At the same time, we have seen that companies' price plans have been adjusted downwards, they are less inclined to raise prices compared to before, says Kennemar.

The development supports the Swedish Central Bank's prognosis, from last week, of two or three interest rate cuts during the second half of the year.

One might possibly move forward a bit faster, with even a third cut.

"A stabilization"

For the composite index, where the manufacturing industry is also included, there was a rise to 52.3 in June, from the revised 51.0 in May.

"The business cycle in the business sector has improved since last year. But it is no acceleration in the upturn, rather a stabilization", writes Swedbank and Silf in a press release.

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By TTEnglish edition by Sweden Herald, adapted for local and international readers

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