Zurich's new Prime Tower, just opened: fully occupied, despite gloomy economic news - a sign of faith in the turnaround?
BERN, SWITZERLAND – The Swiss Secretariat for the Economy, Seco, has revised downward its GDP growth projections for 2012, from 0.9 percent forecast in September to 0.5 percent, following a trend set by major banks’ and others’ research departments. A major impact will be a significant rise in unemployment, Seco notes.
The jobless rate is expected to peak at 3.9 percent at the end of 2012, then slip back down, with annual rates of 3.1 percent in 2011 (currently 3 percent), 3.6 percent in 2012 and 3.7 percent in 2013.
Bern has qualified the economy’s situation as experiencing “a clear slowdown”, but notes that nothing indicates “a bottoming-out similar to what was seen at the end of 2008″, with the global impact of the Lehman Brothers crash, nor is a rapid degradation expected. The accumulated negative impact of the strong Swiss franc, now at CHF1.23 to the euro, is putting the brakes on investment and exports.
The good news is that the slowdown is expected to be temporary, assuming the eurozone debt crisis does not worsen, and in 2013 Swiss GDP growth is forecast to rise again, to 1.9 percent.
Sovereign debt crises in a number of countries, notably in the eurozone, and flagging consumer confidence as well as corporate investment confidence are key factors behind the expected slowdown. Seco’s Group of Experts who are consulted for the official government quarterly forecasts agree that an “uncontrollable contamination” from the eurozone can be avoided, with financial markets recovering bit by bit throughout 2012.
Seco points to the slight improved situation outside the eurozone, with the US’s “vacillating” situation stabilizing somewhat in the second half of 2011, Japan gradually improving and emerging economies recovering from the initial impact of the rest of the world’s economic woes.
ZURICH, SWITZERLAND – Credit Suisse Thursday pushed its GDP growth forecast down sharply, from 2 percent to 0.5 percent, for 2012. The bank points to the euro crisis, which “continues to weigh on markets, with economic momentum in Europe fading unexpectedly quickly.” Switzerland will be hurt by the fall in exports due to “decidedly gloomier” prospects for countries to which the Swiss export, and the accompanying fall in capital investment on new machinery and equipment.
Consumers and the construction industry, which continues to boom thanks to low interest rates, will prop up economic growth, the bank’s analysts say.
Renovations, new construction: building industry and consumption will prop up Swiss economy in 2012
But “a significant cooling of European growth is no longer avoidable”, according to Credit Suisse, and “while the US economy has accelerated again slightly following the dip seen in mid-2011, the opposite is occurring in Europe. Most significantly, economic momentum in Germany – Switzerland’s key trading partner – has slowed. At the same time, the partial spillover of the debt crisis to Italy has brought increased volatility on the financial markets, growing tensions on the credit and interbank markets, and falling confidence among households and businesses.”
Sentiment is more of an issue than home-grown problems, the bank notes, pointing out that Swiss public finances and companies do not have excess debt.
“On the contrary, interest rates in Switzerland will remain low until at least the end of 2012. In addition, inflation is not an issue in Switzerland at present; pressure on consumer prices is holding up, so purchasing power is safeguarded (inflation in 2012: 0.4%). Finally, immigration is likely to remain strong, meaning an important driver of the growth in consumption will remain in place. By contrast, the constant talk of crisis, together with a deterioration in the labor market situation (unemployment rate in 2012: 3.3%), is increasingly impacting sentiment, and poses certain constraints for the growth in consumption.”
Swiss producer and import prices drop - View of the Basel port by Martin Ruetschi/Photopress
NEUCHATEL, SWITZERLAND – The Swiss producer and import prices fell sharply in August 2011 says a report published 14 September by the Federal Statistics Office, FSO.
The index for August slid 1.2% from the previous month as a result of a weak economy worldwide, lower prices for paper, oil, gas and chemical products, and the strengthening of the Swiss franc.
The current index is set at 98.5 points.
Prices for domestic products declined 0.8%, import prices fell 2%.
Compared to August 2010, the price index of the total supply of domestic and imported products decreased by 1.9%.
Following the release of the data, the Swiss franc extended losses against the US dollar gaining 0.39% to trade at 0.8838.
Swiss construction and renovation is booming, thanks to low interest rates
BERN, SWITZERLAND – The current very low interest rates in Switzerland run the risk of overheating the mortgage market and Wednesday the Swiss Federal Council underscored that it considers urgent the need for measures to reinforce macroprudential management.
In particular, the government wants to ensure that the central bank and supervisory authorities have rapid access to lending data from the banks to avoid a Fannie Mae style meltdown from risky loans, with the broader impact that would have on the economy.
The Swiss National Bank and Finma, the federal supervisory body for financial institutions, are already working with the Federal Finance Department, and the working group will very soon begin to involve Swiss banks, the cabinet said in a statement 7 September.
The working group’s work is an extension of steps taken 17 August, when the government announced that banks will be required to get tougher about mortgages starting in January 2012.
Borrowers will need higher down payments to buy homes starting next year.
The group is reviewing the way in which the central bank can have rapid access to bank data when it’s not available to Finma. Current legislation may be too restrictive, the cabinet argues, and if this is found to be the case it will draw up a new legal framework by the end of the year and submit it to parliament.
“Macroprudential” is a relatively recent buzz word in the financial word, says the Bank for International Settlements, reflecting greater concern since 2008 over the impact of high risk lending on the economy as a whole. One of its earliest uses was in 1979, in a background paper prepared for a BIS working committee by the Bank of England:
“Prudential measures are primarily concerned with sound banking practice and the protection of depositors at the level of the individual bank. Much work has been done in this area – which could be described as the ‘micro-prudential’ aspect of banking supervision. […] However, this micro-prudential aspect may need to be matched by prudential considerations with a wider perspective. This ‘macro-prudential’ approach considers problems that bear upon the market as a whole as distinct from an individual bank, and which may not be obvious at the micro-prudential level.”
Background feature: “Swiss mortgage rates remain low, but market increasingly scrutinized”, 17 June 2011, GenevaLunch
Swiss trains improve punctuality: 91.5% on time
UBS forecast, Swiss economy, 7 September 2011 (source: UBS)
GENEVA, SWITZERLAND – Switzerland’s economic picture Wednesday 7 September is mixed, with UBS lowering its 2012 GDP (gross domestic product) growth forecast to 1.3 percent, while luxury goods company Richemond presents first-half 2011 figures showing a XX percent jump in profits and the CFF rail company saying it is making cuts to its 2017 budget because of rising costs.
Swiss economic forecast lower, but UBS remains “optimistic”
Switzerland’s largest bank, UBS, Wednesday 7 September said it is lowering GDP growth forecasts, from 2.7 percent to 2.0 percent for this year, and for 2012 from 2.2 percent to 1.3 percent, but the bank says its remains optimistic about Switzerland’s outlook.
The Swiss economy, the bank notes in a statement published Wednesday, “has performed better than many other Western industrialized economies for a number of years. One reason for this positive development, according to the UBS economists, lies in the bilateral treaties and their effect on immigration levels. The sound finances of private households, firms and the public sector – the Swiss economy is in much better shape than many heavily indebted Western industrialized countries – have also done their bit. The growing discrepancy between the Swiss public sector deficit and that of other Western industrialized countries has increased Switzerland’s attractiveness for businesses, making it a magnet for foreign firms and skilled workers.”
Zurich, Switzerland (GenevaLunch) - The KOF economic indicator rose to 2.24 in March, up from 2.19 in February and 2.16 in January, backing the recent upwards change to the forecast published by the Swiss National Bank, which expects the Swiss economy to grow by 2 percent in 2011.
The latest figures are published by the KOF Swiss Economic Institute, part of EZH, the federal polytechnic university in Zurich. Its original forecast for Swiss growth in 2011 was 2.11.
Links to other sites: Nasdaq, KOF institute, Reuters
Dollar loses strength vs the Swiss franc
(GenevaLunch) – The US dollar has sunk to a record low against the Swiss franc on the prospect that the US Federal Reserve will ease monetary policies (more money-printing). The dollar also fell to a 15-year low against the Japanese yen while the Australian dollar surged to a 27-year high against the US dollar.
On 7 October the dollar fell as low as 0.9555 franc on EBS.
The continued rise of the Swiss franc could have a damping effect on the performance of the Swiss economy as cited in June by the federal government’s Expert Group on Economic Forecasts: “Within the context of the present exchange rate, future export growth is likely to be slightly decelerated but not stalled.”
It defines a damping effect as an exchange-rate-related decline in price competitiveness.
According to the group, “the greatest economic risk for Switzerland is still likely to be a suddenly excessive appreciation of the franc in relation to the euro (flight to the franc as a safe haven).”
SNB revises 2010 Swiss and euro region growth forecasts upwards
Inflation rise will be lower than earlier forecast
A place of one's own (here: Cologny, Geneva), mortgage market mostly unchanged
Ed. note: the dollar rose to CHF1.01 and the euro to CHF1.32 in late Thursday trading against the franc.
Update 16:55 Zurich, Switzerland (GenevaLunch) – The Swiss National Bank (SNB), like the federal government’s group of experts, has raised its forecast for the Swiss economy, saying Thursday 16 September that it expects 2.5 percent GDP growth for 2010, while noting that 2011 will be less rosy. At the same it revised downwards its inflation forecast for the next three years, and it has left interest rates unchanged.
It is leaving the target range for the three-month Libor unchanged at 0.00–0.75 percent and says it intends to keep the Libor within the lower part of the target range at around 0.25 percent.
The Swiss franc rose Wednesday on speculation the SNB would tighten its current expansionary monetary policy and raise interest rates.
SNB September 2010 inflation forecast, Switzerland
On the Swiss mortgage front the bank says “most banks report unchanged lending conditions and a further increase in demand. The growth in mortgage lending and real estate prices has decelerated marginally, compared to the situation at the end of 2009.” The household mortgage situation still requires close watching, it suggests.
“Bleak” exports will nevertheless dampen economy in 2011
Swiss exports are likely to suffer i n 2011
Bern, Switzerland (GenevaLunch) – Switzerland’s growth forecast for 2010 has been raised from 1.8 to 2.7 percent by the government’s Expert Group on Economic Forecasts, but it is expected to slide again in 2011 to 1.2 percent due to a “bleak” exports situation next year. Slowing growth internationally coupled with a high Swiss franc will hurt exports.
“The assessment that a normal recovery in the world economy is being hindered by side effects from the financial crisis has been generally confirmed,” the group states in its quarterly forecast. Recovery from the global crisis has been relatively good in the past year mainly because of “extremely expansive monetary and fiscal policies” according to the expert group, but “signs are increasingly showing that the world economy has switched into a lower gear over the last few months.
The cooling of the economy should gain strength in many countries over the next few quarters.” The euro zone has fared better than initially expected but “European growth prospects remain modest against the background of the slowing world economy,” the report argues.
Switzerland has had strong GDP (gross domestic product) growth in the first two quarters of 2010. “In contrast to most OECD countries, Swiss economic output had reached it pre-recession levels by mid-2010.
UBS fund and higher gold prices help Swiss central bank
Losses less than anticipated
Zurich, Switzerland (GenevaLunch.com) – The Swiss National Bank, SNB, losses reached CHF2.8 billion in the first half of 2010, much less than the CHF4 billion estimated in July 2010.
According to an SNB statement released on 13 August, the appreciation of the Swiss franc against the euro resulted in exchange rate losses of its currency reserves totalling CHF14.3 billion.
The price of gold had the opposite effect resulting in valuations gains of CHF6.8 billion. In addition, Switzerland’s central bank profit from a CHF1.3 billion UBS fund that holds toxic assets from Switzerland’s largest bank, acquired as part its 2008 bailout.
Switzerland holds 1,040 tonnes of gold in the form of currency reserves.
Zurich, Switzerland (GenevaLunch.com) – Swiss is flying high again, with CHF61 million in profits for the first six months of 2010, after a dismal start to the year thanks to the Icelandic volcano that forced planes to stay on the ground. Profits were down compared to the first six months of 2009 (CHF65m), but the company’s total income, CHF2.25 billion, was up 6 percent compared to a year earlier.
The outlook for 2010 remains bright, according to Swiss chief exective CEO Harry Hohmeister. “The developments of the past few months enable us to look ahead with greater confidence than we could have mustered just a few months ago. Business has picked up, and the trend is particularly encouraging on our intercontinental routes. We’ll be investing well over half a billion francs in renewing our fleet and further developing our product this year, and will also be recruiting 500 new staff.”
Hohmeister credited Switzerland’s economic recovery, stronger than its neighbours’ in Europe, with contributing to the good results. The company noted, however, that Swiss “is suffering the effects of both a weakened euro and (above all) a substantial increase in fuel costs.”
Zurich, Switzerland (GenevaLunch) - Switzerland’s economy will grow by 1.9 percent in 2010 and 1.6 percent in 2011, says the federation of Swiss businesses, economiesuisse. The group issued its latest forecast Monday 14 June, labeling it “prudent optimism in a difficult period”. It expects the 4 percent unemployment on average in 2010 to fall to 3.6 percent next year. Prices should stabilize but there remains a risk of inflation in the medium term, it says.
Swiss Post, sorting for international shipping
Bern, Switzerland (GenevaLunch) - The federal government’s Expert Group on Economic Forecasts has raised the country’s growth prospects to 1.8 percent from 1.4 percent in its summer 2010 report, issued Tuesday 8 June. At the same time, it lowered GDP growth expectations from 2.0 to 1.6 percent, citing continuing risks. Unemployment will fall, but only slowly: the jobs outlook is nevertheless brighter, the group says.
Asian economies and the US have picked up, but risk remains closer to home. “In contrast, the eurozone and Great Britain noticeably lag behind with only moderate growth rates. An additional burden was added in the past few months with the rapidly intensifying national debt crisis in the eurozone.”
Sixty percent of Swiss exports go to the eurozone, and while growth overall in the region is likely to be positive, this is the average created by strong economies such as Germany balancing out weak one such as Greece and Spain.
Growth in the Swiss economy slowed down in the first quarter of 2010, compared to the fourth quarter of 2009, but it still qualifies as solid growth, says the Expert Group. Even better: “growth remained broadly supported thanks to continuing export recovery on one hand and sustained robust private consumer demand on the other hand. Even the latest economic indicators still reveal no signs of weakening whatsoever. The business climate among companies has thus significantly improved once again in May; the consumer sentiment index as well (in April) and recent data hint at a further increase in retail sales.”
The strength of the Swiss franc against the euro is a risk factor, but a smaller one than current government policies. “The present global economic recovery is substantially based on the momentum of an extremely expansive monetary and fiscal policy which, however, cannot be continued indefinitely.”
Gloomy economic outlook
Zurich, Switzerland (GenevaLunch) - The Centre for European Economic Research, Zew, says the economic outlook in Switzerland is at a nine-month low.
According to Zew, the indicator for the assessment of the Swiss economic situation has declined for the second consecutive month, and so has the Swiss indicator of economic sentiment.
What this means, according to the institute, is that research respondents expect prices to decrease or remain low; while a larger percentage of financial experts continue to forecast a constant inflation rate. Either way it is a gloomy look at the Swiss economy.
The aim of the Swiss survey is to develop indicators for the general economic climate and the Swiss services sector.
Tourism up strongly, unemployment down slightly, retail sales slip
Geneva continues to have highest jobless rate
Bern, Switzerland (GenevaLunch) - Swiss economic indicators this week are showing a mixed picture, with several federal statistics published Friday. Overnight stays rose by 5 percent overall and by 6 percent for foreign visitors in March, compared to March 2009, an increase of 153,000 stays for the month.
The good news continues with unemployment, which fell from 4.2 percent in March to 4.0 percent in April, representing 7,462 fewer people on the unemployment office books, but the figure is still 16 percent higher than a year earlier. Geneva and Vaud both saw an improvement, with Neuchatel showing one of the greatest drops, from 7 percent to 6.5, but all three continue to have higher rates than the rest of the country. Geneva’s rate, at 7.2 percent, remains the highest cantonal unemployment rate in Switzerland.
Less positive were figures for retail sales, down 0.9 percent for the month of March compared to February.
Adecco net profits more than doubled
Zurich, Switzerland (GenevaLunch) – Better job conditions worldwide have helped Swiss staffing giant Adecco to net $73.5 million, (€57 million), in the first quarter of 2010. The net is more than double the €23m the company earned during the same period in 2009.
Job market growth in France and the United States, cost-cutting, restructuring efforts, and acquisitions in the US and the UK helped the increase.
The search for work continues - Photo Photopress/Martin Ruetschi
Bern, Switzerland (GenevaLunch) – Unemployment in Switzerland has dropped to 4.2 percent from 4.4 percent in February 2010. Although the jobless rate has improved since the start of 2010 it is considerably higher than it was a year ago.
The figures were released 8 April by the State Secretariat for Economic Affairs (Seco).
The current number of persons registered at local unemployment offices across the country totals 166,032: almost 7,000 people less than in February but 31,000 more than during the same period in 2009.
Not-so gloomy forecast after all
Bern, Switzerland (GenevaLunch) – The Swiss State Secretariat for Economic Affairs (Seco) is forecasting higher GDP (gross domestic product) growth and lower unemployment for 2010, even though the economy is still weak and might dip at some point during the year.
The new forecast sees GDP growth of 1.4 percent, double the forecast made in December 2009. Seco has also adjusted its unemployment forecast to 4.3 percent, down from instead of 4.9 percent.
Seco also counsels that other countries’ national and private debt could weigh unfavorably against the Swiss economy. “Countries with above-average growth could be facing appreciation of their currencies,” says the report. The report concludes that “another strong appreciation of the Swiss Franc towards the Euro could have a harmful effect on exports.”
Inflation at a 50-year low
Neuchatel, Switzerland (GenevaLunch) – Inflation in Switzerland reached its lowest point in 50 years which according to experts leaves the Confederation at risk for potential deflation.
Photo: Seco
Basel / Bern, Switzerland (GenevaLunch) - The Swiss economy remains relatively steady, but with Credit Suisse’s Swiss manufacturing index dropping slightly and the forecast for tourism showing lower but stable figures in coming months. The manufacturing figures “still [show] however that the Alpine economy is leaving the deep recession behind,” reports news agency Reuters. The tourism forecast is gloomier and follows publication of figures by BakBasel, an economic research institute, showing that tourism from November 2008 to October 2009 was the second lowest since the end of the second world war: only 1995 was lower.
Swiss exports decline - Photo Stefan Sueess/SECO
Bern, Switzerland (GenevaLunch) - The Swiss economy is still in a recession. GDP (gross domestic product) declined 0.3% in comparison to Q1, and 2% compared to 2008, new figures from the Secretariat for Economic Affairs (Seco) show. The slide is less than many economists were expecting.
Following two quarters of unusually sharp falls, the downward trend in exports of goods fell by 2%. However, value-added in the construction sector increased 1.1%.
Swiss GDP has been shrinking for the past four quarters which confirms the recession. According to economists, a true economic recession can only be confirmed if GDP growth is negative for a period of two or more consecutive quarters.
Related: Le Temps, Fre
Update 13:45 Bern, Switzerland (GenevaLunch) - The Swiss Federal Council (cabinet) met Monday 10 August in an extraordinary session that had sparked speculation they could be meeting to discuss the ongoing UBS court case in the US. Council members were briefed on the case, Swiss news agency ats was told by the Swiss vice-chancellor, André Simonazzi, who refused any further comment and insisted that no further information will be provided until the negotiations between the US and Switzerland for an out of court settlement are concluded.
UBS not mentioned, but Swiss cabinet takes economic measures to fight crisis
Instead, the Council took steps to create the necessary legal base that will allow the Swiss parliament to put in place a series of measures to help the country cope with the economic crisis.
Bern, Switzerland (GenevaLunch) – Switzerland and its largest commercial partner in Asia, Japan, will officially begin a free trade agreement 1 September. Switzerland has become the first European nation to enter an economic alliance with the “Land of the Rising Sun.”
Swiss households spend more money
Neuchatel, Switzerland (GenevaLunch) – The statistics are in: Swiss households are spending and making more money than before or at least they were in 2007, most recent year for which data is available.
According to the Swiss Federal Statistical Office (OFS), a typical Swiss household spent CHF5,430 a month in 2007, an increase of CHF240 compared to 2006. The largest increase occurred in housing and housing-related expenses, vacation and travel.
Zurich, Switzerland (GenevaLunch) – The latest Swiss economic survey taken by German research institute ZEW and Credit Suisse shows that analysts outlooks have “brightened up just a little at a very low level.”
Credit Suisse, Zurich head office
Switzerland (GenevaLunch) – Switzerland will either be in a recession in 2009, the view of KOF Economic Institute in Zurich, published Monday, or it will experience slower growth but without a recession, the view of Credit Suisse, published Tuesday.
Zurich, Switzerland (romandie/ats, Fre) – Economiesuisse, which one month ago hired a new director, Pascal Gentinetta, says a turbulent period is now behind it. The group, the largest umbrella organization representing various actors in the Swiss economy, notes that Swissmem, which represents the mechanical and engineering industries, will remain part of Economiesuisse and that the accent is being put on better integrating its members.
Bern, Switzerland (Le Temps/ats, Fre) – Pascal Gentinetta, 36, has been named the new head of economiesuisse which calls itself the largest umbrella organization representing the Swiss economy. He has been with the group since 1999 and previously worked in the federal government’s finance department. He replaces Rudolf Ramsauer, who is leaving at the end of September to join the communications and public relations department at Nestle’s head office in Vevey. More than 30,000 Swiss companies are members of economiesuisse, which plays an important business lobbying role as well as acting as a representative of business in government project consultations.
Bern, Switzerland (Le Temps, Fre) – Swiss exports (SFr 97.37) were up more than 12% for the first half of 2007. Imports (SFr 90.71) rose 11.1%. The resulting trade surplus of SFr 6.7 billion was characterized as "colossal" by the Swiss Customs Office, which released the figures Thursday.
