A slew of data Thursday has muddied the outlook for the Swedish economy, with retail sales and unemployment figures showing strength while the closely watched consumer confidence indicator drops to its lowest level since January 2010--giving the Riksbank plenty to think about as it considers whether to keep raising interest rates.

Unemployment in Sweden fell to 7.5% in June from 7.7% in May, in seasonally adjusted terms, in a sign that the labor market is improving and seen by some as a signal to the Riksbank to push on with rate hikes.

"A continued improvement of the labor market is important for the Riksbank, and today's figures support our view of further tightening of monetary policy," Nordea bank said.

Retail sales in June jumped 3.4% on the year and "seem to be rising at a steady, albeit moderate pace," SEB bank said.

These numbers too should reassure the central bank that its plan to raise its policy rate from a current 2.0% to 2.9% by the end of next year is the right one, as it seeks to manage rising inflation on the back of robust growth.

The Riksbank forecasts output growth of 4.4% on average in 2011 but this could be in doubt after the forward-looking National Institute of Economic Research consumer-confidence indicator undershot forecasts, falling to 12.0 in July from 16.7 in June.

Flagging consumer confidence could herald falling consumption later in the year, especially as the seven consecutive rate hikes the Riksbank has already pushed through start to bite.

The consumer-confidence indicator showed sentiment has worsened in eight of the 12 months since the central bank started tightening monetary policy.

The NIER said that while its survey showed decent levels of confidence in personal finances it signaled "considerably less positive" consumer confidence regarding the Swedish economy as a whole.

This comes as concerns rise about the handling of fiscal deficits in the euro zone and the U.S. and what this could mean for export-driven Sweden.

Handelsbanken concluded that the declining confidence figures signal a "sharp slowdown" is in the cards for Sweden.

While analysts agree that a rate increase in September is still highly likely, the murky outlook for the Nordic state's economy means the Riksbank's next moves after that are subject to a lot of uncertainty.

"Will the Riksbank be forced to throw in the towel already in September? We doubt that," Martin Enlund at Handelsbanken said. "But the end of the Riksbank's rate hikes appears to be arriving swiftly."

Statistics agency website: www.scb.se