Sweden CPI

Sweden CPI

Consumer Price Index CPI in Sweden reached an all-time high of 315.49 Index Points in April of 2012. The latest data showed that CPI in Sweden decreased to 310.75 Index Points in January of 2015 from 314.05 Index Points in December of 2014.

We use the date chart from 2005 to 2015 by Statistics Sweden. As we all know that the whole tendency of CPI is always increased. Specifically there are two periods of time we should pay some attention.

Firstly, CPI suffered a great decrease from 2008 to 2009, it is easy to think of the American financial crisis which spread all over the world.

 Second period is the recent three years, as you can see from the chart that the CPI of Sweden fluctuated around 315 without continually increasing. Why? Is it health or not for the Sweden economy? What did the Swedish government do to deal with the situation?

Using the CPI solely we won’t have the answer. Because what matters most importantly is not the value of CPI itself, but its function to calculate the Inflation Rate, thus affecting the interest rate.

Sweden GDP Components

Sweden GDP Components





CHART1

CHART2

This chart is from World Bank.According to our textbook, Y=C+I+G+NX. However the formulas and terms used in the real economic world are slightly different.

Formulas (Chart1)GDP = Gross national expenditure + External balance on goods and services

Gross national expenditure = Final consumption expenditure, etc. + Gross capital formation





Final consumption expenditure, etc. = Household final consumption expenditure + General government final consumption expenditure.



When we apply the definition to each sector and make some adjustment. Here comes a chart applying our textbook formula to show the composition of Sweden GDP.  (Chart2)
Among the fours GDP components- C, I, G, NX, there are two of we should pay special attention. 

 

Government purchases

Comparing with the 21% of U.S government purchases in GDP and 8% of HK. Swedish government purchases takes up 27% of the GDP is quite a high value. The government tax a lot from the citizens and using the money to building infrastructure like railways, hospitals and to support its huge welfare system. And we will discuss it in The welfare system in Sweden page.

We can say that Sweden has a ‘big’ government due to the great government spending. But here is a video telling us that the Swedish government is getting ‘smaller’. As of 2012, total tax revenue was 44.2% of GDP, down from 48.3% in 2006.

Net export

Net export contributes 6% to the whole Sweden GDP. Sweden relies a lot on world trade and it is a developed export-oriented diverse economy whose main export partners are Germany, United States and Norway, while the agriculture heavily relies on import.

Pillar industry  

From chart1 we can see that services contributes 74.3% to the GDP, following by industry 24.2%, agriculture 1.5%.

The service sector is definetely the Pillar industry by far the largest in the Swedish economy in terms of employment. It consists not only of traditional services like financial, educational and medical but also of an increasing service part in production industries. Large parts of the Swedish service industry belong to the public sector (especially the welfare system), for instance are almost all hospitals, schools and child care centers owned by the State.

The engineering industry is the largest manufacturing industry in Sweden. The industry has a very high technological level. There are brands that famous all over the world like Volvo, Ericsson, etc.

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 

 

The general situation of Sweden GDP

The general situation of Sweden GDP

The Gross Domestic Product (GDP) in Sweden was worth 557.94 billion US dollars in 2013. The GDP value of Sweden represents 0.90 percent of the world economy. (Sweden GDP, 2015)

Sweden is a major North European economy and to be ranked in the 15th of the top GDP per capita countries according to the data from World
Bank.
Undoubtedly Sweden is a rich country.Its GDP per capita even exceeds Germany. You can see the Sweden’s GDP per capita comparison with Germany and the United States. The high GDP ensured a high living standard to the Swedish people.
 
 

Despite strong finances and underlying fundamentals, the Swedish economy slid into recession in the third quarter of 2008 with a record low of -3.80 percent in the fourth quarter of 2008 and growth continued downward in the fourth as deteriorating global conditions reduced export demand and consumption.

Economic history of Sweden

Economic history of Sweden

 

The economic process of Sweden is said to be have started after 1870, which is regarded as a latecomer comparing with most West European Country.  However, from that period of time, Sweden experienced an astonishing and sustained rate of economic growth, resulting in a 2.1% per year from 1870 to 1970 on GNP, as compared with 1.5-2% for most West European Country and North America.  This sustained economic growth could not get away from the advanced and comprehensive welfare system.  Correspondingly, a relatively high taxation policy was implemented (figure 1). 

figure 1

However, the economic growth of Sweden is not without a hitch at all.  After 1970, the economy of Sweden have faced  a series of fluctuation.  Specially, economic bloom and recession had taken placed continually afterward, which was contributed by the global economic condition and the policy making of Sweden government.

In the early stage after Swedish Social Democratic Party had come to power, the Sweden government accepted extensive welfare benefits policy.  It resulted in about 5-10% decrees in unemployment for 20 years.  This policy preserved until mid-70s—the first significant economic recession after WWII.  A large unemployment rate occurred.  It drove the welfare policy transformation and facilitated the economic democratization which enhanced the substantial welfares including the protection of unemployment, employment welfare to reconstruct the welfare policy.

During 1991 to 1992, a housing bubble derived by the rapid increase in leading had deflated.  It resulted in a widespread insolvency of bank.  In the figure 2,

it shows a catastrophic unemployment rates during the crisis.  Sweden government had learnt a lesson from that and reconstruct the housing policy to comprehend the economic system.

In the modern economy, as the world will be more globalized, the economy of Sweden is interrelated to the global economic situation.  The financial tsunami caused the downturn of Real GDP.  Looking forwards, the economic growth is gradually recovering.