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The Stockholm Chamber of Commerce published its quarterly Stockholm Barometer on February 14. In its summary the Chamber writes, “After a period of normal strong economic activity, the Stockholm economy turned down during the fourth quarter of 2018. The economic climate in Stockholm deteriorates significantly, falling to a level that is … now at the lowest level in almost six years. The slowdown apparent in the three previous quarters seems to have been the start of a cyclical downturn. “
The Stockholm Barometer compared to the last four quarters
The lack of confidence was felt equally by both industry and households, with both recording an index of 93 in 4Q18 (neutral = 100). However, as companies had previously been more positive than households, their drop was greater.
In the sub-segments, the construction industry has been subdued for some time, and continued to ease further. Manufacturing has been strong and remained so. However, sentiment in the trade and service segments has deteriorated rapidly. The Trade segment as a whole lost 5 points, from 101.4 to 96.4, driven primarily by the Food sub-segment which lost 15.6 points, but was still positive at 107.7. Services lost 6.9 points, with both Data and Finance & Insurance losing, although both are still positive.
Stockholm Barometer Over Time
To put the current index into context, the last time that sentiment was this negative was in 2013, as Sweden emerged from the aftermath of the European Debt Crisis. Sentiment is naturally still well above the 2008 low set during the Global Financial Crisis.
Most Stockholmers who work in the business community have their employment in the private service industries (62%). Trade (eg retail wholesale), comes second, with 19%. 11% of Stockholmers work in construction and 8% in manufacturing. This composition has changed significantly over time. Fifteen years ago, considerably more, about one-third, were employed in manufacturing industry, equally weighted with trade and the private service. Thus, employment in private service industries has grown considerably, while fewer are employed in manufacturing and trading.
Despite the weak business sentiment, companies are looking to increase their level of employment. The strongest job growth is in manufacturing and computing. IT companies, however, believe that the employment will decline in strength in the future; linked to the labor shortage within the industry. But sentiment in Stockholm’s construction sector, for many recent years the powerhouse of the economy, is now dismal, reflecting construction companies’ deteriorating economic situation. Employment has fallen to the lowest level in more than five years, with further declines in the future.
Nonetheless, employment overall continues to grow, and employers report a continuing acute labour shortage. More than 40,000 jobs remained unfilled due to a lack of available talent. Employment growth remained higher than the expectations set by companies in the previous quarter. But companies in Stockholm, assess that given the markedly deteriorating demand situation, employment needs will decline.