Swedish High Street Rebound Ends Bets for Riksbank Cuts

A customer carries a branded shopping bag towards a H&M store in Arlanda, Sweden. The revival in consumer spending, which comes amid rising unemployment, may make it easier for the Riksbank to stick to its forecast from last month for unchanged rates this year.
Sweden's consumers are confounding economic forecasters by spending at the fastest pace in 10 months, prompting investors to reverse bets that the central bank will cut interest rates.

Retail sales rose an annual 3.4 percent in February, more than twice the 1.6 percent median forecast in a Bloomberg survey and the fastest pace since April, the statistics office said yesterday. A survey released March 28 showed consumer confidence at a seven-month high while manufacturing confidence rose to the highest since July, recovering from a two-year low in January.

Investors have pared bets on more central bank rate cuts, after policy makers lowered borrowing costs to 1.5 percent last month to stave off a recession. December futures on the Riksbank's key rate rose to 1.26 percent this week from 1.17 percent, suggesting traders are starting to hedge bets the bank will cut once more.

"Economic indicators show that we have bottomed," Riksbank Deputy Governor Karolina Ekholm told Bloomberg after a speech today in Stockholm. "We saw a slight upturn earlier and then everyone sat around waiting if things were to continue up or if things would turn down. Well now things are continuing pretty significantly upwards."