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Beyonce’s Stockholm performance may have contributed to Sweden’s unexpected inflation

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According to economists, the concert may have led to a price increase, but other reasons are also at work.

Sweden’s inflation in May surpassed estimates, likely due to a jump in accommodation rates caused by Beyonce’s concert at the Friends Arena in Stockholm.

Statistics Sweden figures released on Wednesday show an 8.2% year-on-year increase in a pricing gauge that excludes energy prices and interest rate impacts.

This gain exceeded both the median Bloomberg poll estimate of 7.8 percent and the Riksbank’s 8.1 percent forecast.

The sudden surge in hotel and recreation expenses may have been influenced by Beyonce’s global tour premiere in Stockholm, which drew over 80,000 people over two days.

“We believe that this unexpected increase will normalise in June as hotel and ticket prices return to normal levels,” said Michael Grahn, chief economist at Danske Bank.

Despite this, Danske expects the Riksbank to raise interest rates further since the Swedish currency’s weakening and persistent inflation remain worries.

Swedbank economist Glenn Nielsen agreed that Beyonce’s performances may have led to higher lodging expenses in May.

He went on to say that the unusually strong price increase was mostly due to high demand and increased cost pressures, which pushed hotels to hike their pricing.

This news on inflation comes at a time when global pricing pressures are lessening.

According to recent data, US inflation has dropped to its lowest level since March 2021.

Similarly, European consumer prices grew less than predicted in May.

Despite these tendencies, Swedish prices continue to grow faster than the central bank’s aim, which is exacerbated by the Swedish currency’s weakness.

This is similar to the situation in nearby Norway, where the cost of imported items has risen owing to currency weakening.

The recent performance of the Swedish krona, which is trading around all-time lows versus the euro, puts more pressure on the Riksbank to maintain a higher benchmark rate than the European Central Bank.

The ECB is anticipated to boost its deposit rate to 3.5% on Thursday, matching the Riksbank, which also forecasts a rate hike this month or in September.

With the most recent pricing data in hand, most analysts expect the Riksbank to announce a quarter-point rate rise on June 29, notwithstanding any brief Beyonce impact.

“May’s inflation figures were higher than expected, given the overall upturn,” Nordea’s Torbjorn Isaksson remarked. “This reinforces our prediction of a Riksbank rate hike in June.”

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Germany falls into recession as inflation hits economy

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Germany has entered into a recession in the first quarter of the year due to persistent inflation, according to updated growth data. The country’s economy contracted by 0.3% between January and March, following a 0.5% contraction in the previous three months.

The halt in Russian gas supplies after the invasion of Ukraine also had a significant impact on Germany. High inflation, with an April rate of 7.2%, has led to reduced household spending on various goods and weaker industrial orders. The revised figures indicated declines in household and government spending, as well as a drop in car sales after the reduction of government grants for electric and hybrid vehicles. Private sector investment and exports showed some improvement but were insufficient to prevent Germany from entering a recession.

Although the recession was less severe than expected, analysts predict weak economic performance to continue in the second quarter of 2023. The Bundesbank anticipates modest growth in the April to June quarter, driven by an industry rebound offsetting stagnant consumer spending.

The International Monetary Fund (IMF) projects Germany to be the weakest among advanced economies, with a predicted contraction of 0.1% this year, while upgrading its forecast for the UK to a growth of 0.4%.

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G7 face battle for unity as cost of Ukraine war mounts

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The G7 conference in Bavaria will unavoidably centre on Russia’s conflict with Ukraine. Also facing a challenging situation are the leaders of the US, UK, Germany, France, Italy, Canada, and Japan. They want to project a sense of cohesion and resolve in the face of the conflict. The Western alliance has exhibited indications of strain and weariness recently.

Some people, namely in France, Germany, and Italy, have questioned whether it wouldn’t be better for the war to stop even if it meant that Ukraine would have to relinquish some of its land. According to a new study conducted across Europe, some people prioritise the cost-of-living crisis over punishing Russia. Others debate whether it will be necessary to have a connection with Russia in the future.

These arguments have been resisted by nations like the UK, Poland, and the three Baltic States, who claim that any peace agreement with Moscow that is not on Ukraine’s terms will result in future Russian aggression. When he addresses the summit remotely on Monday, President Zelensky is likely to support this claim.

The G7 leaders will likely promise Ukraine more weapons and harsher sanctions against Russia in an effort to clear up these murky seas during the conference. The goal is to demonstrate to Russian President Vladimir Putin that, despite domestic political pressure from citizens worried about rising prices, the West has the patience to continue supporting Ukraine.

The challenge for the G7 leaders is that they are under increasing pressure to demonstrate that they are responding to the financial crisis. Hunger and unrest are being caused by the rising cost of food and fuel worldwide. And some nations blame the West for their problems.

The concerns that the West has about Russian aggression are not shared by many nations in the developing world. They regard the battle as a war of Europe, and they don’t seem to care about the claims made by the West that Vladimir Putin is waging a colonial war. As much as the Russian invasion, they attribute the rising price of gas and oil as well as the severe lack of wheat and fertiliser to Western sanctions.

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