Positive outlook despite subdued growth in the services sector

• July 5, 2024
• admin

On 17 June, Almega presented its second service indicator for the year, which showed that production in the private services sector increased by 1.2 per cent in the first quarter compared with the same period last year.

Steady Rise but Positive Expectations

According to Almega’s chief economist Patrick Joyce, however, the upturn is tentative. Reduced inflation and expectations of lower interest rates create scope for households to increase their consumption, which will strengthen demand in the service sectors aimed at households. At the same time, construction is weak and industrial investment is expected to decline somewhat this year, dampening demand for some business services.

Almega’s service indicator predicts that production will decline slightly in the service sector during the second quarter of this year. However, a slow increase in new orders to service companies lays the foundation for a clearer upturn in the second half of the year. The labour market continues to be weak and Almega estimates that employment in the service sector will continue to decline in the coming quarters.

Recovery in the information and communication industries

In the area of information and communication, production fell last year. After the turn of the year, however, there has been a recovery and in the first quarter, production was 3.8 per cent higher than in the same quarter of 2023. However, exports of information and communication services decreased by 5.2% compared to the same quarter of 2023, mainly due to a sharp decline in exports of telecommunications services as well as a decrease in exports of computer consulting services.

In the information and communications sector, the number of employees decreased by 3,800 persons, or 1.6 per cent, compared with the same quarter last year. The decrease is mainly due to fewer jobs in media, telecommunications, computer consultants and information service companies.

Optimism in the tech industry

However, future expectations are increasingly positive, according to a survey from the Confederation of Swedish Enterprise’s Entrepreneurial Panel, which has broken down into the tech industry. A majority of companies in the tech sector estimate that sales volume will increase in the coming year. Optimism has increased by an overweight of 62 percentage points compared to 59 percentage points in the first months of 2024.

When it comes to investments, 26 per cent of companies say that investments have increased compared to a year ago, while 17 per cent say that they have decreased. For the coming year, 34 per cent expect an increase in investment volume, while only 10 per cent expect a decrease and 53 per cent believe the investment level will remain unchanged.

In the area of employment, an excess of 53 percentage points of companies say they plan to increase the number of employees over the next twelve months, while 35 percentage points believe the number of employees will remain unchanged.

Economic recovery in sight

The Swedish economy is in a recession and the number of unemployed is expected to continue to increase this year and then decrease again in 2025. Inflation has clearly declined and the outlook for the Swedish economy has improved, with an expected gradual increase in growth. Sweden is entering a new phase of the economy.

Given the upcoming recovery and the EU

long-term productivity challenges, economic policy should now focus on creating good conditions for innovation, tech entrepreneurship and building stronger growth.

About the service indicator

The service indicator, developed by Almega since 2001, gives an indication of where economic activity in the private services sector is heading in the short term. The indicator provides information for early forecasting of turning points in economic activity, both in the services sector and for the Swedish economy as a whole, as the private services sector accounts for more than half of Sweden’s total output, GDP.

About the Entrepreneurial Panel

Four times a year, approximately 5,000 members of the Confederation of Swedish Enterprise’s Business Panel answer questions about employment, sales and investments, among other things. The answers from these questions are broken down into the tech industry, where about 300 member companies participate.

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