National Economist: The crisis exaggerated – “makes for better headlines”


It will not be quite as bad as many fear for the economy, at least not according to Professor of National Economics Daniel Waldenström. “It is unwarranted. When you talk to industry representatives, the order books are not empty,” he says about how the companies will be affected by the crisis in the autumn. Published: October 21, 2022, 06:15First a real wolf winter for households, then it gets even worse. This is the view of many people on the economy – but not everyone’s. There is hope for a turnaround and reasons why the world economy will not crash this time either. Daniel Waldenström states that he is “significantly less negative than many others” about how Sweden’s and the The global economy will be fine. In his role as a professor of economics, working at the Institute for Business Research, he follows that debate closely. There is a tendency to reward people who whine and highlight negative perspectives because it is more dramatic and makes better headlines.”It is about how Swedish households will cope with the winter with rising energy prices as well as sky-high inflation, how companies will deal with an impending recession ?The answer is usually not very good, Daniel Waldenström has a different view: “It is unwarranted.” When you talk to industry representatives, the order books are not empty.” This week, for example, engineering giants such as Sandvik and Atlas Copco have come up with interim figures that crushed market expectations.Waldenström points to several signs that the economy is on a more secure basis than many others’ descriptions and mentions one of the pandemic’s major challenges – the logistics problems. After two years of container shortages and queues in the world’s ports, the situation has changed radically. The price of a 40-foot container is now just under $3,700, a whopping 64 percent lower than the same time in 2021, and 32 weeks in a row, falling prices have been noted, according to so-called Drewry composite index regarding container shipping. Another heavy factor is that unemployment remains low in both the American and Swedish labor markets. For the Swedish part, 6.6 percent were registered as unemployed in September with very low notification figures. “Many sectors in Sweden are doing very well. There is a labor shortage,” says Waldenström, and points out that this applies to occupations that require training as well as so-called entry-level jobs.Annika Winsth, chief economist at Nordea, does not dare to be as optimistic but believes that the recession is obvious, the question is how deep it will be. In addition to the labor market, however, she sees further positive factors. “The labor market is still very strong, just like in the US. For Sweden, it is also very important how things are going in the USA. As long as you have a job, you can control your expenses, so that’s a statement of strength,” she says. “Then, in Sweden, we have very strong finances, and should something happen, we have significantly better opportunities than in southern Europe.” For the Swedish households, it is above all inflation that has affected the private economy. However, new statistics have shown a sharp reduction in energy consumption and in Europe the price of natural gas has fallen from an absolute peak of 350 euros per megawatt hour to around 125 euros. The Norwegian Economic Institute (KI) sees in its latest forecast that inflation according to CPIF next year will rise by 4.6 percent in order to 2024 will be well below (0.5 percent) the Riksbank’s 2 percent target. The concern of Waldenström and Winsth is that the central bank is proceeding too strongly with interest rate increases at the same time as political representatives launch new broad stimulus measures to help households but instead topple the economy. “The economy is generally doing quite well. The risk with the Riksbank’s interest rate increases is that you worsen something that wasn’t that serious at all,” says Daniel Waldenström. “It’s such negativism and it’s extremely dangerous. It could prompt politicians to launch yet more ill-conceived aid that is short-term and hugely expensive to pay back in the long run.” An example has been the criticized proposals for tax relief proposed in the UK by the government, which was a major reason why Liz Truss was forced to announce his resignation as Prime Minister on Thursday, despite the fact that the government then changed its mind and made a complete U-turn.”Great Britain must be seen as a deterrent example,” says Winsth. really affected – those who have a lot of food on their budget. You should be able to eat your fill in Sweden. On the other hand, the broad supports … no, everyone must be able to join and pay the bill in Sweden.” Is there anything that could still cause the economic situation we are experiencing now to develop into a full-scale crash similar to one of the worst in history? Daniel Waldenström sees a clear scenario where the Ukraine war develops into something completely different from what it is at present: “The really big threat is a big and extensive war. Then we will stop talking about Bregott prices, I can guarantee that.”

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