the next question is how much importance should be accorded to each of the various factors and which side of the balance carries most weight. as regards the excessively high inflation at present, we have tried to analyse whether there are grounds for supposing that it stems from the swedish economy having been more “ overheated ” during the recent upswing than we counted on earlier. the preliminary conclusion i believe can be drawn is that the explanation does not lie there. most things suggest that inflation ought to fall back next spring as the transitory factors that pushed prices up drop out of the change figures. an alternative approach to whether the high inflation is temporary or more permanent involves looking at the development of by far the most important component of costs, namely wages. in that wage agreements have been completed, it is possible to arrive at a comparatively firm picture of how wages are developing, at least during this year and next. with reasonable assumptions about productivity, most things suggest that unit labour costs should be in line with the inflation target. this presupposes that the registered increase in inflation expectations, above all among labour market organisations, does not show up in wage increases ; if that were to happen it would be very unfortunate and face monetary policy with new challenges. it is therefore important to take very seriously the discussion going on within the trade union movement regarding larger than expected price increases. the weak exchange rate, with the potential economic stimulus it represents via exports, is more complicated. in the past, a marked improvement in costs for swedish exports relative to the main competitor countries has tended to lead to an increased export market share. at the same time, there is no denying that the international economic slowdown is particularly evident in markets of importance for sweden ’ s economy. as long as those markets remain weak, a larger market share for swedish firms will not yield a notable increase in volume. another matter here is that in the it and telecom sectors, on which the swedish economy became increasingly dependent in the 1990s, the problems are not dependent on the krona ’ s exchange rate ; here it is more global factors that are decisive. however, it can also be noted that the order inflow to manufacturing is now falling less markedly than earlier this year. there are certain signs of a levelling out, usually an early indication of a possible upturn in the coming quarters. analysts ’ expectations of this year ’ s profits for listed companies have clearly worsened during the autumn but this has been accompanied by a substantial upward revision

bank has been formally confirmed, accompanied by a clear mandate. the floating exchange rate regime and the explicit target for price stability have worked well. several segments of the swedish economy have been deregulated, though less has been done in this way in the labour market than in markets for goods and services. but the labour market organisations have been working on their own account to improve the system for wage formation. as a result of all this, the swedish economy is doing better than we have seen for a long time. the economic upswing has now continued for more than six years, during which annual gdp growth has averaged around 3 %. and notwithstanding the strong growth of demand, inflation has been lower than one would expect from earlier relationships. everything suggests, moreover, that the economy will continue to impress. last year, gdp growth was 3. 8 % and the increase in employment was the highest in the past twenty - five years. another indication of the good circle in which the swedish economy is developing at present is that forward - looking gdp assessments have also been revised upwards, whereas forecasts of inflation have not been adjusted upwards to the same degree. financial market pricing is also a tribute to the present credibility of swedish economic policy. who would have believed a decade ago that the swedish economy would achieve such a favourable path? the successful combination of relatively high gdp growth and low inflation can in principle be attributed to a number of factors. one may be the plentiful supply of unutilised resources after the crisis in the early 1990s. a change in pricing behaviour may have contributed once the rate of inflation had been brought down to a low and stable level. increased competition in connection with, for example, deregulations, globalisation and it commerce may also have played a part. but it may also have to do as well with an upward shift in trend productivity, so that more goods and services can be produced without an increase in prices, in other words, a higher rate of potential growth. it can be argued that all these factors have in fact contributed to the favourable development. when the upswing started there were plenty of unutilised resources. it is highly likely that pricing behaviour in a low inflation regime differs from that when inflation is high. another circumstance worth mentioning is that both external and domestic competitive pressure have increased and led in many cases to downward price adjustments or just a slow increase. the most recent figures for inflation are one of several illustrations of this phenomenon. while this is strictly speaking