Stockholm, May 29 - Sweden's retail sales growth slowed more than expected in April but analysts said the pace was still healthy and insisted that key rates still need to be raised later this year.
Retail sales rose 6.5 percent year-on-year, the slowest pace in the past year, compared with a 13.4 percent rise in April 2006.
Month-on-month, the increase was 0.1 percent against 3.0 percent a year ago, the Statistics Bureau (SCB) and the Retail Trade Institute (HUI) said in a joint statement.
The mean forecasts in a Reuters poll were for a 7.5 percent and 1.5 percent rise respectively.
"This (slowdown) is as we had expected. Last year was extremely strong, it's a tough comparative month," said Danske Markets analyst Michael Bostrom.
"Retail sales are still growing rapidly, but it's not the same volume increase explosion as at the end of last year. The numbers are still very strong."
He added the numbers did not affect his expectations about Sweden's central bank.
The Swedish crown weakened against the euro on the news, while bond yields were unchanged.
"I see (the numbers) as showing that there is still brisk underlying retail sales, but that growth peaked during the first quarter and that we are now heading toward lower growth rates," said Swedbank analyst Thomas Jellvik.
"This supports the view that while interest rates should rise, it should be at a measured pace. The worst fears in the market simply don't seem to be realised," he said.
The SCB and HUI said sales growth was driven by building materials, which shot up 25 percent. Price rises in the retail sector were still moderate despite the strong sales growth.
Accumulated retail sales growth in the year-to date was stable around 6 to 7 percent.
"It is clear that also 2007 will be a year of historically very strong growth for the retail sector," they said.
The Riksbank is widely expected to raise its key repo rate to 3.50 percent at its next meeting in June which would be the highest level since March 2003, and to keep hiking it thereafter.