Sweden turned in its poorest trade performance since 1994 in August, data showed, as an unexpectedly anemic surplus raised red flags over the country's growth and inflation prospects.

The country had a trade surplus of just 600 million crowns ($92 million) last month, down from 8.2 billion in July, the statistics office said. This was the worst since a 440 million crown deficit in August 1994.

"It's so weak that it becomes somewhat of a puzzle, what's happening here," said Michael Grahn at Danske Markets.

Sweden's economy has been growing briskly in recent years, helped in part by a heavy flow of net exports.

The country has just 9 million people but it boasts a large stable of top companies that export all over the world. Firms such as mobile network maker Ericsson , ball-bearing maker SKF and retailer Hennes & Mauritz all have dominant positions in their markets.

Grahn said he would expect the August surplus to be revised but still thought foreign trade could take a large bite out of third-quarter gross domestic product (GDP).

"It seems extremely bad so I guess that figure will be revised up," he said, adding that it would take a substantial revision to raise it to an acceptable level.

Swedish trade figures regularly get revised.

Runo Samuelsson, who deals with trade data for the statistics office, said he did not expect a revision to the August data beyond maybe 500 million to one billion crowns.

The May surplus had been revised up nearly two billion crowns to 11.6 billion and the June surplus was revised down to 14.6 billion from an originally reported 15.2 billion.

But Samuelsson said some of the previous revisions were due to faulty data reporting by companies and it would be highly unusual to get a huge shift in the overall balance.

INFLATION SIGNALS

The trade numbers came alongside data showing a fall in producer prices, a rare sign of easing inflation pressures.

The producer price index dropped 0.4% in August and was up 4.2% from a year earlier. The annual increase was smaller than a 5.5% gain registered in July.

"It is raw materials prices which are pulling it down but they will rise again next month," said Thomas Jellvik, economist at Swedbank.

The statistics office attributed the decrease in the index to lower prices for iron, steel, ferro-alloys, chemicals and machinery among other factors.

"It gives slightly softer inflation signals than if we had got the result that we had expected," said Elisabeth Kopelman of SEB. "But one should be a bit careful about putting too much weight on one set of figures."

Sweden's Riksbank has been working to slow inflationary pressures in a strong economy where the labor market is drum-tight and wages are rising. The central bank has raised interest rates three times this year, to a current 3.75%.

The foreign trade numbers may complicate the central bank's job, Grahn said.

He said barring a big jump in September's surplus and a significant revision to August's, foreign trade weakness could whittle the third-quarter pace of growth down to almost nothing.

"If that happens and at the same time you have a strong labor market that means that cost pressures will increase even more than what we have seen," he said.

The number of hours worked in Sweden has been rising, but output gains have not kept pace, suggesting productivity growth is easing and adding to inflationary pressures. (Reuters)