Robust consumption pulls Swiss out of recession
National Bank chairman says prospects have improved as GDP grows by 0.3% in third quarter
Zurich: The Swiss economy pulled out of recession in the third quarter thanks in part to robust private consumption, while a jump in PMI data to a 20-month high confirmed the economy is recovering faster than expected.
Swiss National Bank Chairman Jean-Pierre Roth also said prospects for the economy had improved.
Gross domestic product grew by 0.3 per cent compared with the previous three months, slightly more than economists had expected and the first rise since the second quarter of 2008, the State Secretariat for Economic Affairs (SECO) said yesterday.
"The result was rather robust and for the first time in five quarters we have positive growth indications, which is encouraging. We expect this will continue," said Fabian Heller, an economist with Credit Suisse.
The Credit Suisse/SVME Purchasing Managers' Index rose to a seasonally adjusted 56.9 points in November, its highest since March 2008 and well above the 54.9 points forecast by economists polled by Reuters.
The unexpectedly strong data briefly helped the Swiss franc breach parity with the dollar, strengthening it to 0.9995 (Dh3.65) per dollar. The franc also firmed against the euro, beyond 1.5067 per euro.
Despite mounting evid-ence the economy is on the mend, the SNB is expected to maintain its expansive monetary policy when it holds its next meeting on December 10 and is not seen raising rates until at least well into 2010.
Speaking in Frankfurt before the data in comments released later, Roth said the SNB was sticking to its goal of fighting a rise in the franc against the euro as it mulls the right moment to start withdrawing extraordinary support for the economy.
Inflation data — due on Friday rather than the GDP and manufacturing numbers — will likely be more important in influencing a possible SNB revision of inflation and growth forecasts at the meeting next week, economists said.
Deflation risk
Roth said the risk of deflation could come back if the financial crisis were to intensify again.
The SNB in September forecast inflation of minus 0.5 per cent this year and 0.6 per cent in 2010 plus a decline in gross domestic product of 1.5 to 2.0 per cent this year.
"The SNB will be very unwilling to go back on its current policy of easing before they see signs of a pick-up in inflation," said Deutsche Bank economist Henrik Gullberg.
Roth has said current policy conditions will have to be corrected soon to avoid medium-term inflationary pressures as the economy improves although he still sees 2010 being another tough year.
