Growth remains subdued but expectations for the future increasingly positive
On June 17, Almega presented its second services indicator for the year, showing that output in the private services sector turned up in the first quarter of this year and was 1.2% higher than a year ago.
According to Patrick Joyce, Chief Economist at Almega, however, the upturn is tentative. Falling inflation and expectations of lower interest rates provide scope for households to increase their consumption, which will increase demand in the service industries that sell to households during the year. At the same time, construction is weak and industrial investment is expected to fall slightly this year, holding back demand for some business services.
Almega's services indicator predicts that production will fall slightly in the services sector during the second quarter of this year. A slow increase in orders to service companies lays the foundation for a clearer upturn in the second half of this year. The labor market remains weak, however, and Almega's assessment is that employment in the service sector will continue to decline in the coming quarters.
In information and communication, output fell last year. After the turn of the year, however, there has been a recovery and in the first quarter output was 3.8% higher than in the same quarter of 2023. Exports of information and communication services performed well in early 2023 but fell towards the end of the year. In the first quarter of this year, exports, at current prices, were 5.2% lower than in the same quarter of 2023. The decline in exports is mainly explained by a sharp fall in exports of telecommunication services, but exports of computer consultancy services have also declined.
Jobs in the information and communication sector continue to decline. In the first quarter of this year, the number of people employed was 3 800 - or 1.6% - fewer than in the same quarter of 2023. The decline is mainly due to fewer jobs in various media activities, but the number of people employed in telecommunications, computer consultancy and information services companies has also fallen by 1 300 over the past year. These are sectors where jobs have been steadily increasing for a long time.
However, expectations for the future are increasingly positive. This is shown in the Confederation of Swedish Enterprise's Entrepreneurial Panel, which has been broken down into the tech industry. The survey, which was conducted in April and May, shows that a majority of companies in the tech industry believe that sales volumes will increase in the coming year. The net figures for the tech industry are higher with a 62 percentage point preponderance of optimistic companies expecting an increase compared to 59 percentage points in the first months of 2024.
26% of companies state that investments have increased compared with a year ago, while 17% say that they have decreased. When asked how they think developments will be in the coming year, more companies say they expect increased investment. 34% of companies see an increased investment volume in the coming year, while only 10% see a decrease and 53% see no change.
When it comes to the number of employees, a preponderance of 53 percentage points of companies say that they will increase the number of employees over the next 12 months. There is also a relatively large share of 35 percentage points that believe they will keep the number of employees unchanged.
The Swedish economy is in a recession and the number of unemployed is expected to continue to rise this year and then fall again in 2025. Inflation has fallen back significantly and the outlook for the Swedish economy has brightened, with growth expected to gradually increase. We are entering a new phase in the economy.
Given that recovery is on the horizon and the EU's long-term challenges are about productivity, economic policy should now focus on creating the right conditions for innovation, tech entrepreneurship and building stronger growth.
About the services indicator
The services indicator has been produced by Almega since 2001 to give an indication of where economic activity in the private services sector is heading in the short term. The indicator provides information for early prediction of turning points in the business cycle, both in the service sector and in the Swedish economy as a whole, as the private service sector accounts for more than half of Sweden's total production, GDP.
The full report can be found here, Trevande Uppgång (almega.se)
About the Entrepreneurs Panel
Four times a year, around 5,000 members of the Confederation of Swedish Enterprise's Entrepreneurial Panel answer questions about employment, sales and investments as well as some current business issues. The answers to these questions are broken down into the tech industry where about 300 member companies can answer questions.
Find out more and join the Entrepreneurs Panel, https://www.svensktnaringsliv.se/foretagarpanelen/