Svante Öberg: Potential GDP, resource utilisation and monetary policy
Speech by Mr Svante Öberg, First Deputy Governor of the Sveriges Riksbank, at the
Statistics Sweden's annual conference, Saltsjöbaden, 7 October 2010.
* * *
It is always a pleasure to take part in Statistics Sweden's conferences in Saltsjöbaden. This
is the tenth conference in which economic analysis and economic statistics meet in a
constructive dialogue. Questions regarding productivity have been in focus ever since the
first conference in 2001. At that time I was Director General of Statistics Sweden and I had
been inspired by the analyses of productivity made by Statistics Canada. I thought there
should be scope for more of this in Sweden, too. It is therefore very gratifying to see that this
work is continuing.
My main message today can be summarised in two points. The first is that I wish to show
that it is difficult to estimate potential GDP and resource utilisation. Different methods give
different results. At present this is, moreover, particularly difficult because of the financial
crisis and the deep recession we are now recovering from. Secondly: despite the difficulties
in making such estimates, I would nevertheless like to claim that potential GDP has probably
fallen as a result of the crisis, which is significant for monetary policy.
My own assessment is that the GDP gap was around + 2 per cent in 2007, prior to the start
of the crisis, and that potential GDP has declined by around 4 per cent as a result of the
crisis. The GDP gap therefore only fell by around 6 per cent between 2007 and 2009, despite
actual GDP declining by around 10 per cent in relation to the trend. The GDP gap was thus
approximately - 4 per cent in 2009 when the recession was deepest. According to current
forecasts, the GDP gap will have closed by the end of the forecast period three years from
now.
I intend to begin by talking about what the real economy - in other words, production and
employment - means for monetary policy. I shall then go on to talk about how one can
measure potential production and resource utilisation - two central concepts in this context.
Then I shall discuss what has happened to GDP in conjunction with the financial crisis. After
that, I will describe what different methods can tell us about potential GDP and resource
utilisation. Finally, I intend to talk about the significance of resource utilisation for inflation and
current monetary policy.
What does the real economy mean for monetary policy?
The overall principles for monetary policy are described in the publication Monetary Policy in
Sweden.1 It states the following:

"According to the Sveriges Riksbank Act, the objective for monetary policy is to
maintain price stability. The Riksbank has specified this as a target for inflation,
according to which the annual change in the consumer price index (CPI) is to be
2 per cent."

"At the same time as monetary policy is aimed at attaining the inflation target, it is
also to support the objectives of general economic policy with a view to achieving
sustainable growth and high employment. This is achieved through the Riksbank, in
addition to stabilising inflation around the inflation target, also striving to stabilise
production and employment around long-term sustainable paths."
Production and employment are thus included in the monetary policy analysis in two ways.
Firstly, stable production and employment around levels that are sustainable in the long run
are important objectives for economic policy. Secondly, the level of production and
employment in relation to potential production and employment - or put another way,
resource utilisation - is an indicator of future inflationary pressures.
How are potential GDP and resource utilisation measured?
Resource utilisation can be measured in many different ways. I would like to focus on the
GDP gap. The GDP gap has the advantage of providing the most comprehensive picture of
the extent to which resources in the economy are being used and GDP is the central
forecasting variable. The GDP gap is the difference between actual GDP and potential GDP.
By potential GDP, I mean the level of GDP that is compatible with a use of the available
resources that is sustainable in the long term and that does not push up inflation. Resource
utilisation may be either positive or negative.
Potential GDP is often measured by using what is known as an HP trend. This is a statistical
method used to show the underlying trend in GDP. By simultaneously trying to minimise
deviations from actual GDP and to show the most even curve possible, the HP trend
provides something in-between the often jagged curve which shows the actual GDP
outcomes and a linear trend. An HP trend is a fairly good measure of the underlying
longterm development in GDP during normal cyclical fluctuations.
One problem with an HP trend as a measure of potential GDP is that its terminal point is
normally close to the terminal point of the actual time series. This makes it a poor measure of
potential GDP towards the end of the series. Often, it is precisely the terminal point that one
is interested in. Another problem with an HP trend is that it is not a good measure if there are
structural shifts in potential GDP - and it is natural to believe that such shifts take place in
connection with a deep recession.
These problems are clearly visible if one compares the most recent calculation of the GDP
gap in the September Monetary Policy Update with the estimates made in real time. In the
years before the crisis, resource utilisation was probably higher than the HP gap indicated at
that point. This view is also suggested by the fact that GDP growth was high, employment
was increasing rapidly, underlying inflation was rising to above 2 per cent, and that
household borrowing and house prices were similarly rising rapidly. (Figure 1. GDP gaps in
September and in real time).
This is a widely known problem that occurs internationally, and not just here. Orphanides
says that one should not use the GDP gap as a measure of resource utilisation, due to the
uncertainty in estimates of the gap. He shows, for instance, that the International Monetary
Fund's (IMF) calculations of the GDP gap for the United States at different points in time
have yielded conflicting results with regard to resource utilisation and that these have
therefore led to incorrect economic policy recommendations. He draws the conclusion that
one should focus more on GDP growth than on the GDP gap, which, he claims, may provide
more robust decision-making data.2
There are also other ways of measuring resource utilisation. A common method is to use a
production function where potential GDP is determined by potential labour productivity and
the potential number of hours worked. Other possibilities include using so-called UC
models,3 principal component methods4 or models where one estimates a flexible-price
output gap.5 Resource utilisation can also be measured by the employment rate,
unemployment and other measures. I will return to a number of these measures later.
What has happened to GDP in connection with the crisis?
During the years prior to the financial crisis, productivity growth in Sweden was rapid. At
earlier conferences here in Saltsjöbaden, I have pointed to possible causes of the rapid
growth in productivity.6 Examples of structural causes are deregulation of product markets,
increased competition through globalisation, increased use of information technology or - the
theme of this year's conference - a rising level of education and a changed work structure.
However, productivity also varies over the business cycle. In June 2007 - before the financial
crisis began - our assessment was that productivity growth would be lower in the coming
years. But we did not foresee that productivity would fall as heavily as it did. In June 2007,
we were assuming that productivity would increase by a total of around 5 per cent during the
years 2008 and 2009. Instead, it fell by around 5 per cent. The main reason for this fall was
an exceptionally steep decline in demand. GDP fell by a total of 5.5 per cent during the years
2008 and 2009, instead of increasing by an almost equivalent percentage, as predicted.
Experiences from previous deep recessions in Sweden in recent decades indicate that such
steep declines in GDP have long-lasting consequences. During the recessions of the second
half of the 1970s and the early 1990s, the GDP level did not return to the previous trend
during the ten-year period following the decline in GDP. (Figure 2. Historical GDP trends).
In connection with financial crises, it is normal for GDP growth to be significantly lower and
unemployment higher for an extended period after the crisis, as compared to a period of
equivalent length before the crisis. Reinhart and Reinhart have described this in a paper
recently presented at a conference at Jackson Hole.7 This is partially because credit
expansion and increasing real property prices prior to a crisis tend to be followed by
tightening and falling prices after the crisis. They also note that dampened growth and higher
unemployment after a financial crisis may result in lower investment and the depreciation of
human capital, which, in turn, may lower both the level and the rate of increase of potential
production.
Also in connection with the current crisis, the Riksbank expects lower GDP in the long term
than we did before the crisis. We are now expecting GDP to be approximately 4 per cent
3
UC models (UC = Unobserved Components) involve using economic theory to identify which development of
the non-observed potential variables is compatible with the development of observed variables, such as GDP,
employment, unemployment and inflation.
4
Principal component analysis is a statistical technique for compressing information, reducing the number of
variables and examining systematic variations in data. The method entails calculating new latent variables,
principal components, which can explain most of the variation in the process.
5
The flexible-price output gap is mentioned in modern research into monetary policy, where one often talks
about flexible-price production instead of potential GDP. Flexible-price production means the production that
would arise if both prices and wages were entirely flexible. However, determining this gap is sensitive to how
one models the economy and interpretation may be difficult in the absence of in-depth knowledge of the
model's properties. For a discussion of the flexible-price output gap and monetary policy, see Jonsson, M.,
Nilsson, C. and Palmqvist, S. (2008), "Should monetary policy stabilise resource utilisation?" Economic
Commentaries 1, Sveriges Riksbank.
6
Öberg, S. (2007), "Productivity and monetary policy", 7 June 2007 and Öberg, S. (2008), "Monetary policy and
productivity", 29 January 2008.
7
Reinhart, C. M. and Reinhart, V. R. (2010), "After the Fall", National Bureau of Economic Research Working
Paper No. 16334. See also Reinhart, C. M. and Rogoff, K. S. (2008), "The Aftermath of Financial Crises",
National Bureau of Economic Research Working Paper 14656.
BIS Review 130/2010
lower at the end of the forecast period than we expected two years ago. Lower productivity is
responsible for virtually the entire decline, while the number of hours worked is estimated to
remain largely the same. However, it should not be assumed that this fall can be attributed
solely to the crisis. Many other events have also affected the assessment. (Figure 3. GDP,
hours worked and productivity).
How large is potential GDP and how high is resource utilisation?
I now intend to discuss what different methods have to say about the levels of potential GDP,
the GDP gap and resource utilisation, and I will start by comparing the GDP gaps based on
HP trends (HP gap) that the Riksbank usually presents with the GDP gaps used by the
National Institute of Economic Research and the Ministry of Finance. The pre-crisis GDP
gaps reported by the latter two are less positive than the GDP gap we publish, namely
around 2 and 3 per cent respectively, as opposed to approximately 4 per cent. The f all up to
2009 is roughly the same according to all three, with the negative gap in 2009 thus being
greater for them than it is according to our HP gap. (Figure 4. The GDP gap according to the
Riksbank, the National Institute of Economic Research and the Ministry of Finance).
The OECD, the IMF and the European Commission also report GDP gaps for Sweden.
According to the OECD and the European Commission, the GDP gap for 2007 is on
approximately the same level as the Riksbank's HP gap, approximately + 4 per cent. The
negative gap at the recession's lowest point in 2009 has been estimated at - 4 per cent by
the European Commission and at - 7 per cent by the OECD. The GDP gaps of 2010 and
2011 according to both of these institutions can be disregarded, as their reports were
compiled before the summer and, since then, GDP outcomes have been surprisingly high. In
its latest report, the IMF reckons with a GDP gap of approximately 2.5 per cent for 2007,
followed by a decrease to almost - 5 per cent in 2009 before reaching - 1.5 per cent in
2011.8 (Figure 5. The GDP gap according to the Riksbank, the OECD, the IMF and the
European Commission).
All three organisations reckon that potential GDP has fallen in conjunction with the crisis. For
example, the OECD estimates that potential GDP has decreased by an average of
approximately 3 per cent for the countries in the OECD area, as a consequence of the crisis.
Approximately two-thirds of this decrease is due to higher capital costs caused by the return
to normal risk and interest rate levels after the abnormally low levels prevailing prior to the
crisis, which is having a dampening effect on capital intensity. The remaining third is due to
an increase in structural unemployment and a decrease in labour supply. As regards
Sweden, the dampening effects of structural unemployment and falling labour supply are
deemed to be below average, however.9
Another question is whether long-term GDP growth has fallen as a result of the crisis.
Experiences from previous financial crises indicate that there frequently is a connection.
However, in the report mentioned, the OECD writes that it does not expect any decline in
long-term GDP-growth (after 2015) due to the crisis. The OECD sta tes that it will indeed
decline, but as a result of demographic developments. At the Riksbank, the crisis has not led
us to make any new assessment of the long-term GDP growth used in our models. We
expect long-term GDP growth to be just above two per cent per year.
Resource utilisation can also be measured in the labour market by, for instance, the
10
employment rate , unemployment, the employment gap and the hours gap. The
employment gap and the hours gap have been estimated with the aid of HP trends and are
thus subject to the problems entailed by such estimates. In contrast, the employment rate
and unemployment are not associated with the same type of technical problems, but here it
is instead difficult to know what can be considered to be normal levels for the respective
variables. In the Figure, they have been included as deviations from the average in
2000-2007, without taking a stance on which levels should be considered normal. They may
have been affected both by the reforms made and by the deep recession. These are, of
course, important issues to be addressed, but I will not go into them today. (Figure 6. Labour
market gaps).
The various labour market gaps co-vary for natural reasons. However, the employment rate,
the employment gap and the hours gap reach zero at the start of 2011 and are faintly
positive for the rest of the forecast period, while unemployment is above average over the
entire forecast period. It is common for unemployment to increase rapidly in a deep
recession and decrease slowly during the recovery. However, it is also possible that we are
underestimating the strength of the recovery in the labour marke t - as, indeed, we have done
recently. It can also be noted that the positive deviations from the average are of the same
magnitude in 2007 as they were at the previous peak in 2001.
The National Institute of Economic Research's Economic Tendency Survey can also be used
to describe resource utilisation. There exists a clear connection between various variabl es in
the Survey. For example, companies' planned price increases co-vary with the other
variables, for example shortage of labour. (Figure 7. Indicators for the business sector).
However, most of these reported variables are ones that show changes. This is true of
demand, for example. The question is whether it is expected to become better or worse.
Consequently, these variables are not good measures of the level of resource utilisation, but
rather of whether this is increasing or decreasing. However, the business tendency surveys
also include variables that measure levels. For example, this applies to the shortage of
labour in the business sector and capacity utilisation in the manufacturing industry. These
have both increased recently and it canno t be ruled out that these will reach normal levels by
the end of this year. (Figure 8. Shortage of labour in the business sector and capacity
utilisation in the manufacturing industry).
It is also interesting to compare shortage of labour with unemployment. These co-varied
significantly before the crisis. However, shortage of labour is now increasing more rapidly
than unemployment is falling. This indicates that there may be significant matching problems
in the labour market long before unemployment comes down to a normal level. (Figure 9.
Shortage of labour in the business sector and unemployment).
At the Riksbank, we have also developed a special indicator to measure resource utilisation,
the so-called RU indicator.11 This uses a principal component method to extract common
information from a large number of business cycle indicators in levels. The RU indicator also
indicates that resource utilisation in Sweden was about as high in 200 7 as at the previous
peak in 2000. This contrasts with the GDP gap based on HP trends, which was much higher
in 2007 than in 2000. (Figure 10. The GDP gap and the RU indicator).
An indication of the significance of the crisis for potential industrial production can also be
obtained by combining statistics on industrial production and capacity utilisation.12 Industrial
production fell by a maximum amount of 24 per cent from its peak in the first quarter of 2008
to its lowest point in the second quarter of 2009. Potential industrial production fell by 14 per
cent with a time lag of two to three quarters and by approximately 20 per cent in relation to
the previous trend. Such a fall in potential industrial production could explain a fall of
approximately 4 per cent in potential GDP, as the level of value added in the manufacturing
industry was equivalent to approximately 20 per cent of GDP prior to the crisis. (Figure 11.
Industrial production, capacity utilisation and potential industrial production).
To sum up, I can note that potential GDP and resource utilisation are difficult to estimate.
Different methods give different results. This is particularly difficult right now due to the
financial crisis and the deep recession from which we are emerging. At the Riksbank we are
continuing to work with these issues and expect to take up resource utilisation in more detail
in the next Monetary Policy Report in October. Uncertainty surrounding resource utilisation
also makes it difficult to assess whether or not monetary policy is well-balanced.
My own assessment is that resource utilisation was more or less as high before the crisis as
during the previous boom in 2000 and that the GDP gap was thus in the range of + 2 per
cent in 2007. Here, I assume that the GDP gap based on HP trends provides a reliable
measure of the GDP gap for 2000 and that other series, for example the RU indicator,
indicate that the level of resource utilisation was approximately the same in 2007 as in 2000.
I also assess that potential GDP decreased by approximately 4 per cent in conjunction with
the crisis. This is slightly above the OECD's calculations, but the OECD has only calculated
the effect of certain identified changes within the framework of a production function. It has
not considered other possible effects of the crisis on potential GDP, such as, for example, an
abnormally high level of capital consumption. Swedish experiences of previous deep
recessions and international experiences of financial crises both indicate that the effects can
be greater. The difference from the GDP forecasts we made before and after the fall of GDP
in 2009, as well as estimates of the manufacturing sector's potential production also indicate
an effect of approximately 4 per cent. I also think that this reduction in potential GDP should
be ascribed to the recession of 2009, rather than being spread out over a longer period of
time before and after the recession.
This means that the GDP gap was approximately - 4 per cent when the crisis was most
severe in 2009. Instead of increasing according to trend by over 4 per cent between 2007
and 2009, GDP fell by 5.5 per cent. This resulted in a fall in actual GDP of approximately
10 per cent in relation to the trend. However, potential GDP also fell as a result of the crisis
by around 4 per cent. This means that the GDP gap only fell by around 6 per cent. The level
both that
of the GDP gap is significant for monetary policy. A large negative gap indicates
inflationary pressures can be expected to be low and that there are more compelling reasons
to support production and employment through an expansionary monetary policy.
My assessments indicate that the GDP gap was lower before the crisis than appears from a
GDP gap based on HP trends. HP gaps do not work well as measures of resource utilisation
in deep recessions. However, despite this, my own assessment corresponds fairly well with
the level that the HP gap indicates for 2009. It is also compatible with current forecasts
indicating that the GDP gap should be largely normal by the end of the forecast p eriod. Total
GDP growth for the three years 2010-2012 is just above 10 per cent, which is four
percentage points more than growth according to trend of just above 6 per cent.
What does resource utilisation mean to inflation and current monetary policy?
Previously, I said that the Riksbank also strives to stabilise production and employment
around development paths that are sustainable in the long term, and that by potential GDP I
mean the level of GDP that is compatible with a utilisation of available resources sustainable
in the long term and that will not push inflation up or down. As you know, the target for
monetary policy is to keep inflation at a low and stable level. However, one problem when
shaping m onetary policy in practical terms is that the link between resource utilisation and
inflation is not particularly clear. I will now discuss what resource utilisation means to
inflation.
In Sweden, the link between resource utilisation and inflation has been weaker since the
mid1990s than it was previously. This is due to the fact that monetary policy has gained a high
level of credibility. As long-term inflation expectations among households and companies are
now solidly anchored around the inflation target of 2 per cent, there is simply not much scope
for other variables to affect inflation. However, it is also due to the fact that inflation is
affected by many other factors than resource utilisation, such as variations in energy prices,
exchange rate fluctuations and changes in interest rates.13
However, the fact that it is difficult to estimate stable links between resource utilisation and
inflation using econometric methods does not mean that these links do not exist.
International experience indicates that minor variations in resource utilisation in normal times
do not significantly affect inflation, but that a very low level of resource utilisation noticeably
dampens inflation. In the current crisis, with a very low level of resource utilisation in the
United States and the eurozone, underlying inflation has fallen from normal levels of around
2 per cent to around 1 per cent. As far as Sweden is concerned, it appears that, despite
everything, there is a relatively strong link between u nderlying inflation and resource
utilisation measured using the RU indicator with a time lag of one to two years. (Figure 12.
The RU indicator and HICP inflation excluding energy14).
In Sweden, underlying inflation measured in terms of the CPIF (the CPI with a fixed
mortgage rate) has stayed at, and even above, 2 per cent over the last two years despite the
fall in resource utilisation. This is probably related to the substantial weakening of the krona
in the most acute phase of the crisis. This contributed to rising import prices measured in
Swedish kronor, which kept up inflation. The krona has now strengthened again and is more
or less back to its pre-crisis level against the euro, and CPIF inflation has fallen back to
below 2 per cent. (Figure 13. CPI and CPIF inflation).
During the forecast period, we expect CPIF inflation to first fall to around 1 per cent, but then
to rise again to around 2 per cent at the end of the forecast period. CP I inflation fell
dramatically during the crisis as a result of our repo rate cuts, but it will increase to a level
higher than CPIF inflation as we increase the repo rate to a more normal level.
When we compare various measures of resource utilisation with the forecasts we make for
inflation in the latest Monetary Policy Update, the following picture emerges. Underlying
inflation measured in terms of the CPIF begins to rise in 2011. By that time, resource
utilisation measured in terms of variables such as the RU indicator, shortage of labour in the
business sector, capacity utilisation in the manufacturing industry, the employment rate and
the HP trend-based measures the employment gap and the hours gap will probably already
have risen to above-normal levels.
Underlying CPIF inflation will then rise to 2 per cent at the end of the forecast period.
Resource utilisation measured using the GDP gap based on HP trends will then have
reached a normal level. The HP gap will then be more or less zero. My own assessment is
also that the GDP gap will then have reached the zero level. However, even by the end of
the forecast period, unemployment will not have reached the average level in the years
before the crisis.
Our forecasts thus paint a rather complex picture. There is no simple link between one
measure of resource utilisation and one measure of inflation. Resource utilisation can instead
be measured in several ways, each of which has its strengths and weaknesses. Inflation can
also be measured in a number of ways and we regularly utilise a large number of measures
of underlying inflation. In this multi-faceted world, we make the best assessments we can of
the direction of monetary policy.
At the latest monetary policy meeting on 1 September, we decided to raise the repo rate by
0.25 percentage points to 0.75 per cent, and our assessment was that the repo rate will
gradually be increased to more normal levels as resource utilisation increases. The repo rate
will nevertheless be abnormally low for some time to come in order to support the recovery in
the economy. I supported the forecast for the repo rate made in the latest Monetary Policy
Update - a forecast that I believe is well in line with the picture of a stable economic upturn in
Sweden. (Figure 14. Repo rate).
For my part, I have felt very convinced of two things, which I clearly explained in the most
recent minutes. Firstly, we ought to increase the repo rate in the months ahead, as the
Swedish economy is developing so strongly. Resource utilisation is increasing, which will
increase inflationary pressures over time. We should therefore ease up in order to avoid
excessive inflation in the period ahead. Secondly, the long-term repo rate should be
approximately 4 per cent, corresponding to inflation of 2 per cent and a real interest ra te of
2 per cent. The latter figure is what the short real interest rate on government bonds has
been, on average, in both the United States and the eurozone for long periods of time.
On the other hand, it is difficult to have a definite opinion of what the repo rate ought to be in
two or three years. Neither our own nor the market's forecasting abilities are sufficient to
make solid forecasts over such a period. Among other reasons, the repo rate will be
dependent upon developments in the eurozone and in the United States, and the impact
these may have on the Swedish economy. Weaker international development could entail
weaker development in Swe den and a lower repo rate path in the long term. However,
stronger development of the Swedish labour market could entail higher inflationary pressures
and a higher repo rate path.
Despite this uncertainty, my view is that we should report the assumptions we make about
the repo rate in conjunction with our forecasts. It would be remarkable if we reported all other
circumstances surrounding the forecasts except the repo rate itself, which is the only one of
these we take decisions on. Furthermore, it would not be wise to base our forecasts on the
market's forward rate curve in those cases in which our assessment of the repo rate - as at
present - deviates from the forward rate curve. We are also careful to point out that the repo
rate is a forecast and not a promise. However, our possibilities of steering interest rates
further ahead on the repo rate path are highly limited. What we can do is to communicate our
own assessment, which is also associated with great uncertainty.
The statistics that have been reported after the most recent Monetary Policy Update indicate
a stronger development in Sweden than we had expected. According to the National
Accounts from September, GDP growth was more rapid in the second quarter of 2010 than
was reported in August's flash estimate. The Economic Tendency Survey and purchasing
managers' index for the manufacturing sector in September were positive and exceeded
market expectations. According to the Labour Force Survey, unemployment fell in August by
slightly more than we had expected. As regards international developments, however, the
situation continues to be uncertain. Statistics and other information are occasionall y above
and occasionally below expectations. We will not present any new overall assessment of
economic developments until after the next Monetary Policy Meeting on 25 October.
GDP gaps in September 2010 and in real time
Per cent
Source: The Riksbank.
Figure 2
Historical GDP trends
Index 2000 = 100
GDP, hours worked and productivity
Index 2007 Q4 = 100
Note: Broken lines denote the Riksbank's forecasts in MPU September 2008.
Sources: Statistics Sweden and the Riksbank.
Figure 4
The GDP gap according to the Riksbank,
the National Institute of Economic Research
and the Ministry of Finance
Per cent
The GDP gap according to the Riksbank,
the OECD, the IMF and the European Commission
Per cent
Figure 6
Labour market gaps
Percentage deviation from the HP-trend and
from the average 2000-2007, seasonally-adjusted data
Indicators for the business sector
Deviation from the average, percentage points
Note. Companies' inflation expectations 12 months ahead are denoted in tenths of a percentage
point.
Source: National Institute of Economic Research.
Figure 8
Shortage of labour in the business sector and
capacity utilisation in the manufacturing industry
Deviation from average 1996-2007
Shortage of labour in the business sector and unemployment
Deviations from the average 2000-2007
Sources: National Institute of Economic Research and Statistics Sweden.
Figure 10
The GDP gap and the RU indicator
Percentage deviation from HP trend and
number of standard deviations from the average
Industrial production, capacity utilisation
and potential industrial production
Per cent
* Calculated as industrial production x (average capacity utilisation 1996-2007/capacity utilisation).
Sources: National Institute of Economic Research and Statistics Sweden.
Figure 12
The RU indicator and HICP inflation excluding energy
Per cent, deviation from average 1997-2007
Sources: Statistics Sweden and the Riksbank.
CPI and CPIF inflation
Annual percentage change
Note. The CPIF is the CPI with a fixed mortgage rate. The broken lines denote the Riksbank's
forecasts in