Sweden Inflation Misses Sharply in October, Weakening Case for Riksbank Rate Hike

Sweden's inflation cooled far more than expected in October, with the headline CPI rising 0.9% year on year against a consensus forecast of 1.2% and a prior reading of 1.1%. On a monthly basis, CPI was flat at 0.0%, well below the 0.3% expected and a sharp deceleration from the 0.9% gain recorded in September. The Riksbank's preferred measure, CPIF, also undershot, coming in at 1.1% year on year versus the 1.4% estimate and a prior 1.5%, while CPIF excluding energy fell to just 0.1% year on year against a 0.5% forecast and prior reading. The monthly CPIF ex-energy print was -0.2%, below the 0.2% expected. Analysts noted the data weakens the case for another Riksbank rate hike.

At an ECB conference, Executive Board member Isabel Schnabel said the bank's previous forward guidance had been too "Odyssean," binding policy too closely to a low-inflation world, and argued that monetary policy should respond to the effect of shocks on the inflation outlook rather than the nature of the shock itself. She also cautioned that the rise of non-bank finance and an increase in public debt could threaten monetary dominance, and said many arguments in favor of deregulating the banking sector are flawed. Fellow ECB policymaker Moulin separately warned that higher yields represent a new test for the financial sector, adding that uncertainty around the French budget is amplifying the rise in bond yields.

France's industrial production contracted 0.5% month on month in September, missing the 0.3% gain forecast and extending a 0.4% decline in August. Eurozone construction activity continued to deteriorate in October, with the S&P Global Construction PMI slipping to 42.5 from 43.4 in September, led by a sharp drop in Germany to 41.6 from 43.5, though France saw a rebound to 48.8 from 39.8 and Italy edged up to 47.3 from 46.5. Russia's services PMI eased to 50.1 in October from 51.3, pulling the composite reading down to exactly 50.0 from 50.8, signaling stagnation. A market economist flagged that Eurozone PPI for the same period is likely to print above 11.0% year on year, well above the Bloomberg consensus of 10.6% and sharply higher than the 8.2% prior reading.