The Scandinavian country has been beset by rising levels of unemployment and household debt in recent years, posing a threat to an economy traditionally regarded as being among the most stable in the world. Andreas Steno Larsen from Nordea Bank told the Telegraph: “If you think the euro area mess is over, then think twice.
“Sweden is the canary in the coal mine.”
Mr Steno Larsen’s analogy is a reference to the birds which miners used to carry with them into mines as a safety precaution.
If toxic gases collected deep below the Earth, the canaries would die before the miners were affected.
Their demise enabling the miners to escape before suffering serious harm and hence offering an early warning system.
In the same way, Sweden’s plight was a warning of more deep-seated problems, Mr Steno Larsen said.
He added: “We feel confident that Sweden is in a light recession right now.
“It is Europe’s most open economy and it acts as a bellwether for the world.”
Swedbank Manufacturing Purchasing Managers’ Index (PMI), which is derived from a survey of 200 purchasing managers in the manufacturing industry, measures the performance of the manufacturing sector.
The most recent, September, figures showed factory activity fell to 46.3 in September, significantly below the anticipated 52.
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The increase is likely to have a knock-on effect on the housing market, given the price of apartments has more than doubled in the last 10 years.
Meanwhile while household debt accounts for 190 percent of disposable income.
The Riksbank, the central bank of Sweden, said in its recent financial stability report household debt represented “the greatest risk in the Swedish economy”.
Lars Christensen from Markets and Money Advisory said: “The rise in unemployment is quite dramatic and it is worrying.
“Sweden is being hit by the contraction in world trade.
“It is telling a story for the whole world economy, and that story is ‘watch out’.”
