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UPDATE 3-Swedish industry output posts worst fall in 2 years
April 10, 2012 / 3:25 PM / 6 years ago

UPDATE 3-Swedish industry output posts worst fall in 2 years

* Swedish Feb industrial production -7.1 pct yr/yr

* Biggest fall in production since Nov 2009

* Industry orders tumble 8.3 pct in Feb

* Stats office says indications downturn may be temporary

* Raises uncertainty on rates ahead of Riksbank April meeting

By Niklas Pollard and Johan Sennero

STOCKHOLM, April 10 (Reuters) - Swedish industrial production suffered its sharpest fall since 2009 in February, jarring a reassuringly rosy outlook painted by other recent economic indicators and calling into question expectations the central bank will not take rates any lower.

The Nordic country, sheltered by robust public finances, has so far weathered the downturn spawned by the euro zone debt crisis and recent gauges of economic activity had pointed to a moderate recovery.

Although the statistics office said there were indications the fall in production was temporary, the output numbers raised doubts how well Sweden’s export-dependent economy can perform if large swathes of the European economy, its biggest export market, slip into recession.

Industrial production fell a much worse-than-expected 5.2 percent in February and tumbled 7.1 percent year-on-year, statistics office SCB said, the sharpest fall since the aftermath of the global financial crisis, in November 2009.

“This was much weaker data than we had expected. Even if we were at the low end looking at consensus, we really didn’t expect it to come in this low,” SEB analyst Sanna Eckardt said.

Analysts polled by Reuters had expected a 0.2 percent gain on the month for a year-on-year increase of 1.1 percent.

Industry order bookings were no better, plunging 5.5 percent on the month and 8.3 percent on the year.

SCB said the sharp fall in production was judged to be temporary based on underlying data, but declined to be more specific.

The biggest fall in production was for the non-durable consumer goods sector, which makes up around 20 percent of the whole index.

“We suspect that it could be related to a production drop in the pharmaceutical industry, but we don’t know exactly what happened,” said Torbjorn Isaksson, chief analyst at Nordea.

Analysts said that because the statistics are based on relatively few firms in the non-durable consumer goods sector, the drop might be a result of production problems at one individual company.

Drug firm AstraZeneca, which has a large production facility in Sodertalje, south of Stockholm, is Sweden’s biggest drug maker and confirmed it had had production problems due to a new administrative system.

“It is a large and complex implementation, so we have had production disruptions and now we are working to catch up,” said Ann-Lena Mikiver, spokeswoman at AstraZeneca in Sweden.

She declined to say how large an effect the problems had on production.

AstraZeneca’s pill factory in Sodertalje is one of the biggest in the world and the company exports around 44 billion crowns ($6.5 billion) of drugs yearly from the country.


The data and the difficulty in interpreting them are a headache for analysts looking for clues to whether the central bank will hold rates at its April meeting.

“This will be a problem for the Riksbank. Many have believed they would keep rates unchanged (in April), but this muddies the waters,” Swedbank analyst Per Sellden said.

“The chances of a cut have to be higher after these figures.”

Sweden’s economy contracted sharply in the fourth quarter, hurt by the euro zone’s debt crisis which dragged down demand for the country’s goods.

Recessions seemed a possibility and many analysts at the time expected the Riksbank to be forced into several more interest rate cuts this year after cuts in December and February.

Recent moderately upbeat economic gauges, however, have left a growing number of analysts expecting the Riksbank to leave interest rates on hold at its next monetary policy meeting due on April 17 with the decision announced the day after.

In addition, Swedish Central Bank Deputy Governor Karolina Ekholm, a noted dove, said on the sidelines of a conference at the end of last month that Sweden’s economy may have bottomed out, further fuelling expectations of unchanged rates.

The Riksbank said at its last meeting in February it expected borrowing costs to stay on hold until some time in 2013.

The Swedish crown weakened sharply after the data and was trading at around 8.89 to the euro at 1312 GMT against 8.85 earlier in the day. Swedish two-year debt yields were also down.

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