Nordic Economies Are Hot

[HenryTo]

An example of what a little set of reforms can do. Following article is courtesy of WSJ:
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Nordic Economies Are Hot
Unemployment Falls
As Growth Takes Off;
Contrast to Euro Zone
By JOEL SHERWOOD
February 16, 2007

STOCKHOLM -- Economies in the Nordic region are surging, driven by strong consumer demand, robust exports and recent changes to free up local labor markets.

From almost every angle, the economies of Sweden, Norway, Denmark and Finland look much stronger than those in the euro zone. In Sweden, double-digit percentage growth in consumer sales last year helped to produce the country's best year of economic growth since the 1970s. Labor-market overhauls have helped push unemployment to near record lows in Denmark, Finland and Norway.

"Sweden enjoys excellent macroeconomic performance with high rates of growth, low unemployment and stable inflation expectations," the Organization for Economic Cooperation and Development, or OECD, said Wednesday in a survey on the Swedish economy.

The organization also uses the word "booming" to describe Sweden's neighbors. It says Finland's economy will get a further boost from increased trade with Eastern Europe, while property investment in Denmark is expanding at double-digit rates and job vacancies in Norway's oil-driven economy are at record levels.

The only downside: Falling unemployment is boosting wage growth and starting to push inflation higher. Swedish consumer prices rose 1.4% last year after a 0.5% rise in 2005, according to Statistics Sweden. Norwegian consumer prices rose 2.5% in 2006 after a 1.5% rise in 2005, Statistics Norway says.

Central bankers are taking note. Late last month, Norway's central bank raised its key interest rate a quarter of a percentage point to 3.75%. Yesterday, Sweden's central bank raised its repo rate a quarter point to 3.25%.

Like many observers, Goldman Sachs expects interest rates to continue to rise into 2008. It forecasts Sweden's key rate will rise to 4.5% while Norway's climbs to 5.5%.

By contrast, the European Central Bank is expected to finish increasing interest rates soon, at around 4%, from 3.5% currently. Finland uses the euro, so its central bank doesn't decide rates, while Denmark has fixed its krone to the European currency. Its central bank keeps its key rate at a quarter of a point above the ECB's.

Despite the rate rises, the Nordic economies are set to continue to grow rapidly, economists say.

"There are two winners from the booming economies in Scandinavia," says Roger Josefsson, a Copenhagen-based economist at Danske Bank. "Companies which are focused on the domestic market, and then the currencies in Sweden and Norway."

In Sweden, the new center-right government, which won power in September after 12 years of Social Democratic rule, has cut income taxes and employer fees and reduced unemployment benefits to increase both labor demand and supply.

One result: Retail sales in Sweden jumped 10.9% in December from a year earlier.

"To put Sweden's 10.9% year-on-year growth rate into context, Euroland retail sales rose 1.6% year-on-year in November," Kevin Daly of Goldman Sachs said.

At Clas Ohlson AB, an 89-year-old Swedish hardware and home-products retailer with stores in Sweden, Norway and Finland, January sales were up 20% from a year earlier. That followed a 15% year-on-year rise in December.

The Port of Göteborg, Sweden's busiest, said the number of containers it handles has grown nearly 25% over the past three years. Kjell Svensson, an information officer at the port, said an expansion costing 1.5 billion Swedish kronor ($215 million) is in the works to handle the increasing load, and that traffic is expected to rise about 7% in 2007.

At the same time, the Swedish and Norwegian currencies are likely to strengthen in the coming year, thanks to higher interest rates and strong economic growth.

"We are definitely bullish on both currencies," said Ian Stannard, a London-based currency strategist at BNP Paribas. He sees the Swedish krona gaining 5.5% and Norway's krone 6.2% against the euro by year's end.

And unemployment is set to decline, giving more Northern Europeans money to spend at stores.

"Retail sales will remain high across the region in 2007, boosted by the rise in disposable income from improving labor markets and high wage growth," says Henrik Mitelman, a Stockholm-based economist at SEB.

[HenryTo]

Denmark borrows at negative yields.

http://www.bloomberg.com/news/2012-01-02/danish-investors-balk-as-debt-yields-turn-negative-amid-foreigners-buying.html

[rffrydr]

[rffrydr]

...and a cheap currency. Volvo's been kicking ass competing head-to-head with CAT in the American market for heavy equipment--with those well thoughtout engineering touches that the europeans are so good at.

And don't forget a little thing called crude. Other than oil Nokia IS Norway--and that future is looking tired.
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