When the pandemic hit, the economy stopped, only to recover quite well after a few months - at least nationally due to various government support packages. When the pandemic began to subside, Russia began to undermine the prospects for the world to return to some kind of normality by invading the Ukraine. The resulting energy crisis hastened a recession in many countries with inflation a result.

Right now in Europe, inflation in many countries is high, while other countries experience no direct inflation at all. In Sweden, where I live, everything has gone up in price, especially food. But if you take a country like Spain, prices have more or less stayed the same. Some countries have either dealt with inflation or it has not yet taken hold. In Sweden, we are also struggling with an extremely weak currency, the Swedish Krona. Never before have both the Euro and the US dollar cost so much. For Sweden, this benefits our exports, but imports will be more expensive, and means that it may soon be time for Sweden to join EMU (European Monetary Fund) and exchange the Krona for the Euro. We have long guarded our own currency, and previously Sweden had a fixed exchange rate against both the Euro and the US dollar. In the 1990s the exchange rate was floated, and it continues to float today. This has meant that the value of the Krona has sometimes, somewhat unfairly, been given a lower value than it should in relation to the country's economy.

What has happened since Russia's invasion of the Ukraine is that Sweden and many other European countries have slowly been dragged into a recession. In Sweden, the poor performance of the economy is a fact today. Although there is still a great shortage of housing, many construction projects have been stopped and put on hold. Our recession is not like the major recession of the 1990s when we had too many empty homes, which is at least a positive thing. Normally, a situation like this is usually reflected in housing prices going down, but that has not happened, at least not in Stockholm, where apartment prices have instead skyrocketed. Almost every item that comes up for sale involves bidding and prices are at astronomically high levels, well above their true value. If the recession worsens in the autumn, there is a risk that many buyers will find themselves in property they cannot really afford if/or when property prices actually come down. Many may be forced to sell at a loss and then it starts to resemble the recession we had in the 1990s.

I think this scenario is similar to many other European countries and the only thing we can do is wait and see. But most recently, positive signals came from the United States' Central Bank, which did not choose to raise interest rates during the month of June as it believes it has succeeded in its plan to reduce inflation. This immediately had a positive impact on inflation in Europe, and in Sweden, inflation went down and to just over 7% (down from approx. 10%).

Does this mean that we can hope that things may turn round this autumn and the supposed recession may not be as deep as feared? Our own industries - demolition, concrete cutting, concrete floor grinding, recycling etc - are of course affected by the recession when construction projects are slowed down or cancelled. As long as I've been writing about these industries, our contractors have largely managed to stay afloat thanks to being able to work on projects such as renovation, remodelling and additions. There are basically always jobs, but of course, not everyone can take on these types of work instead. Now we are starting to see is that some contractors are being forced into bankruptcy for various reasons. Let's hope that we come out on the other side of this recession in a condition to be able to keep up when the economy turns up again.
 

Jan Hermansson
Editor-in-Chief
jan.hermansson@pdworld.com