By Niklas Pollard
STOCKHOLM, Sept 1 (Reuters) - Sweden's economy will grow robustly in 2010 and 2011 despite a global slowdown, a leading think tank said on Wednesday, boosting analysts' expectations the central bank will hike rates tomorrow.
The National Institute of Economic Research (NIER) raised its growth outlook to 4.3 percent this year and 3.4 percent in 2011, up from 3.7 and 3.0 percent respectively in June.
The government and a number of banks have also raised their forecasts for growth recently and 14 of 15 analysts polled by Reuters last week saw the central bank increasing interest rates to 0.75 percent from 0.5 percent on Thursday, despite growing evidence that global economic growth is cooling.
The NIER, which supplies economic forecasts to the government, said household consumption, industry investment and a rebound in exports would underpin Sweden's recovery.
'However, the fragility of the world economic recovery casts a shadow on this bright picture. The road back to economic balance is long and lined with uncertainty,' the NIER said in its latest forecast.
'Exports will be up by more than 10 percent for the full year 2010. In the following years the market for Swedish exports will be expanding less strongly, while the Swedish krona will continue to appreciate.'
Signs that the U.S. economic recovery may be faltering have multiplied in recent months, raising fears that its fragile economy could slip back into recession or face a prolonged period of lacklustre growth.
MANAGERS LESS UPBEAT
Reflecting the gloomier outlook for the global economy, separate data showed Sweden's purchasing managers' index for the manufacturing sector fell back to its lowest level since late last year in August.
The seasonally adjusted gauge, compiled by Silf and Swedbank, fell to 60.6 points for the manufacturing sector in August from 64.2 points in the previous month, coming in well below the 63.6 points seen by analysts in a Reuters poll.
Fifty points marks the divide between expansion and contraction in the manufacturing sector.
'PMI has been above 60 the whole of 2010. It has fallen back a little and we think it will continue to fall back,' Nordea economist Torbjorn Isaksson said.
'Over time it will tick down toward 55-50. We have a slowdown in global growth, and that will impact Swedish industry,' he added.
Sweden is still benefitting from a stronger recovery than much of Europe with strong public finances -- the country is seen running the smallest deficit in the European Union this year -- sheltering it from the wave of debt turmoil and fiscal retrenchment sweeping the region.
'PMI came down a bit, but if you compare with other countries it is still high in Sweden. These are still levels indicating a good pace in the Swedish economy, so their is no disconnect between this data and the NIER forecasts,' SEB analyst Elisabet Kopelman said.
'It is factored into expectations that we have seen a peak in the industrial gauges. What is important is if they will remain at levels indicating expansion or not.'
The NIER institute said it saw the central bank's key repo rate at 1.0 percent by the end of 2010. Its previous forecast was 0.75 percent.
(Additional reporting by Johan Sennero, Johan Ahlander and Helena Soderpalm; Editing by Ron Askew) Keywords: ra SWEDEN ECONOMY/ (Stockholm Newsroom, tel: +46-8-700 1017, e-mail: stockholm.newsroom@reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
STOCKHOLM, Sept 1 (Reuters) - Sweden's economy will grow robustly in 2010 and 2011 despite a global slowdown, a leading think tank said on Wednesday, boosting analysts' expectations the central bank will hike rates tomorrow.
The National Institute of Economic Research (NIER) raised its growth outlook to 4.3 percent this year and 3.4 percent in 2011, up from 3.7 and 3.0 percent respectively in June.
The government and a number of banks have also raised their forecasts for growth recently and 14 of 15 analysts polled by Reuters last week saw the central bank increasing interest rates to 0.75 percent from 0.5 percent on Thursday, despite growing evidence that global economic growth is cooling.
The NIER, which supplies economic forecasts to the government, said household consumption, industry investment and a rebound in exports would underpin Sweden's recovery.
'However, the fragility of the world economic recovery casts a shadow on this bright picture. The road back to economic balance is long and lined with uncertainty,' the NIER said in its latest forecast.
'Exports will be up by more than 10 percent for the full year 2010. In the following years the market for Swedish exports will be expanding less strongly, while the Swedish krona will continue to appreciate.'
Signs that the U.S. economic recovery may be faltering have multiplied in recent months, raising fears that its fragile economy could slip back into recession or face a prolonged period of lacklustre growth.
MANAGERS LESS UPBEAT
Reflecting the gloomier outlook for the global economy, separate data showed Sweden's purchasing managers' index for the manufacturing sector fell back to its lowest level since late last year in August.
The seasonally adjusted gauge, compiled by Silf and Swedbank, fell to 60.6 points for the manufacturing sector in August from 64.2 points in the previous month, coming in well below the 63.6 points seen by analysts in a Reuters poll.
Fifty points marks the divide between expansion and contraction in the manufacturing sector.
'PMI has been above 60 the whole of 2010. It has fallen back a little and we think it will continue to fall back,' Nordea economist Torbjorn Isaksson said.
'Over time it will tick down toward 55-50. We have a slowdown in global growth, and that will impact Swedish industry,' he added.
Sweden is still benefitting from a stronger recovery than much of Europe with strong public finances -- the country is seen running the smallest deficit in the European Union this year -- sheltering it from the wave of debt turmoil and fiscal retrenchment sweeping the region.
'PMI came down a bit, but if you compare with other countries it is still high in Sweden. These are still levels indicating a good pace in the Swedish economy, so their is no disconnect between this data and the NIER forecasts,' SEB analyst Elisabet Kopelman said.
'It is factored into expectations that we have seen a peak in the industrial gauges. What is important is if they will remain at levels indicating expansion or not.'
The NIER institute said it saw the central bank's key repo rate at 1.0 percent by the end of 2010. Its previous forecast was 0.75 percent.
(Additional reporting by Johan Sennero, Johan Ahlander and Helena Soderpalm; Editing by Ron Askew) Keywords: ra SWEDEN ECONOMY/ (Stockholm Newsroom, tel: +46-8-700 1017, e-mail: stockholm.newsroom@reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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