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High inflation in Sweden can no longer be blamed on a single lady, with price pressures remaining strong despite stripping out the rise in restaurant and hotel costs that economists pinned on Beyoncé’s Stockholm concerts.
The US singer was thrust into the macroeconomic spotlight last month when economists linked the first two concerts in her Renaissance tour — which opened in the Swedish capital on May 10 — to an unexpectedly high inflation reading that month.
Danske Bank blamed a record 3.3 per cent month-on-month increase in the restaurant and hotel prices in May on Beyoncé’s arrival. Inflation in that category slowed to just 0.33 per cent in June, suggesting a transitory Beyoncé effect.
“This kind of ‘tourflation’ seems to not be there in June, as we suggested it was in May,” said Filip Andersson, head of Nordic macroeconomic research at the lender. “June was still a strong, seasonal month [but] the upturn in May was just extraordinary.”
However, overall inflation was higher than economists’ forecasts and fell only slightly from 9.7 per cent in May to 9.3 per cent last month, as domestic factors overtook any effect related to the pop icon’s concerts in the country.
Price rises for package holidays, car rental and international flights as Swedes took summer holidays fed a 0.9 per cent monthly increase in prices.
Adrian Prettejohn, Europe Economist at Capital Economics, said there was “some evidence that there may have been a Beyoncé effect” from the slowing in hotel and restaurant price increases. However, he added that the shift “doesn’t change the overall picture for Swedish inflation, which is pretty strong and stronger than expected.”
June’s inflation figures maintain pressure on the Riksbank, which is expected to increase interest rates by 25 basis points to 4 per cent at its September meeting.
Statistics Sweden, the country’s statistics bureau, said CPIF, the central bank’s preferred measure of price changes, fell from 6.7 per cent to 6.4 per cent. Economists polled by Bloomberg had expected a slowdown to 6 per cent. CPIF-XE, which strips out the volatile energy component, only fell from 8.2 per cent to 8.1 per cent, in a sign of sticky prices.
The decline in headline inflation was driven in part by falling food inflation and lower prices for clothing. There was a further offset from decreasing electricity and fuel prices.
Francesco Pesole, a foreign exchange strategist at ING Bank, said a strengthening in the krona over the past week should ease inflationary pressures by lowering import costs. “The krona’s recovery is offering some breathing room for the Riksbank, but evidence of sticky inflation — paired with those of rebounding long-term inflation expectations — all suggest a hike at the September meeting is quite likely,” he said.
A weakness in the Swedish currency against the dollar lay behind the surge in hotel prices triggered by the Beyoncé concerts, as her US fans took advantage of relatively cheap tickets for the Stockholm shows.
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